Abbey National profits up by a fifth

Spanish-owned Abbey National provided some rare good news in the embattled banking sector today as it said annual pre-tax profits lifted by more than a fifth to £991 million.

But Santander's UK operation group, which now also combines recent takeover Alliance & Leicester and the savings arm of failed bank Bradford & Bingley, said bad debts were rising as borrowers struggle with repayments.

The group has upped provision to cover bad debts, contributing to a 3.57 billion euro (£3.18 billion) writedown at parent group Santander for 2008.

Abbey said the number of homes repossessed soared by 62 per cent to 860 last year, with the number of loans more than three months in arrears increasing by 39 per cent to 10,897.

The group is now the UK's second biggest mortgage lender and third largest savings bank following last year's dramatic move to snap up the savings operation of collapsed Bradford & Bingley and Santander's rescue takeover of Alliance & Leicester.