HBOS has gone out of its way to reassure investors that its rising bad debts on loans to private individuals are no worse than it had expected and that it was on track for its targeted profit growth for the first half of this year.
The shares edged 111/2p higher to close at 812p after the bank described its mortgage lending, after repayments, as "robust", in line with its market shared last year.
Corporate lending had also sustained a strong performance, though HBOS said it was vigilant in its lending to protect shareholder returns.
The merged Halifax and Bank of Scotland had reported back in March that its retail bad debts had risen.
This prompted it to tighten its lending rules.
Overall, it is looking for "another year of measured asset growth". Last week, Barclays caused a flurry of alarm by saying that provisions against bad and doubtful Barclaycard debts would cause its overall total for bad debts to rise quicker than expected this year. HSBC has also warned of worsening retail loan quality.
HBOS said its revenues are "usefully ahead of last year", while margins are stable and costs under control, in an update ahead of its first-half results due on August 3.
"Critically, the deterioration in retail is in line with previous guidance and there has not been a material worsening in expectations," Keefe, Bruyette & Woods analysts commented with an " outperform" rating on HBOS in a note to clients.
HBOS has expanded massively since its formation from the merger of Halifax and Bank of Scotland in 2001.
It posted a 22 per cent increase in profits for 2004 to £4.6 billion in March after winning a bigger market share in credit cards, current accounts and personal loans.
HBOS shares closed up 61/4p at 5433/4p.