The group, created by a government-backed merger, also reported good revenue growth on the back of favorable interest and currency rates, improved spreads in derivative transactions and a good performance in wholesale activity.

Detailed figures were not included in the group's trading update.

"We continue to expect retail impairment levels to rise significantly during 2009, in both the secured and unsecured lending portfolios," the company said.

"We expect continuing declines in commercial property prices and reducing levels of corporate cash flows as we anticipate a continuing difficult economic outlook. These factors are now leading us to anticipate further corporate defaults during the rest of the year,