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The bank made a strategic change earlier in the year, deciding to direct its resources more towards lending than repaying the current £10.9bn it owes the government.

However, it has stated that it will not reach its target of £5bn of new lending this year, estimates being more in the region of £4bn.  The bank has pointed to a shortfall in funding as part of the problem, claiming there would have been demand for further lending if they had the resources available.

The bank is awaiting European regulatory clearance on a proposed split into two companies, one responsible for new lending and the other for existing lending and repayment of the government loan.  Once approval has been granted, which the bank expects in the autumn, and the restructuring has taken place the government will provide additional funding.

The bank’s available resources have also been hit by mortgage arrears.  3.92% of its mortgage loans were more than three months in arrears, well above the national average of 2.39%.

The bank also released an underlying loss figure which excluded certain elements, which it said gave a better reflection of the state of the business.  This showed a drop in the loss to £269.6m for the half year, compared with £443.3m for the same period of 2008.