Bank profits lower than expected

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The Independent Online

Britain's biggest mortgage lender HBOS posted a three per cent rise in annual underlying profit today, just short of analysts' expectations, as margins in its core retail business came under pressure.

HBOS reported an underlying pre-tax profit of £5.71bn for 2007, up from £5.54bn in 2006 and just below an average forecast of £5.73bn from analysts polled by Reuters Estimates.

The bank said its net interest margin fell to 1.63 per cent for the year from 1.72 per cent, as its retail banking margin dropped 12 basis points due to competitive pressure in the first half of last year and higher funding costs in the second half.