Arbuthnot Securities said it was cautiously optimistic for the full year - despite seeing profits dip at its Midland- based lending arm.

The investment firm, formerly Secure Trust Banking Group, doubled its pretax profits from £1.6 million to £3.5 million in the six months to June 30.

Secure Trust Bank, which employs 400 people at its base in Solihull, built on the developments of the last year and recorded a four per cent increase in operating income, chairman Henry Angest said.

Within this net interest income grew by 12 per cent, helped by a nine per cent rise in lending volumes.

But Mr Angest sounded a note of caution, as pretax profits at the trust bank arm of the business fell from £3.1 million to £2.9 million.

Chief executive Stephen Lockley said: "The strong growth in revenues has been because we have rebranded ourselves and refurbished our branch network.

"But we have suffered from having more people who have not been able to keep up with their loan repayments.

"At the same time, we have experienced some increase in the level of bad debts on consumer lending, although these remain modest in relation to the size of the loan book."

Arbuthnot Latham, the private banking division continued to attract new clients, which helped operating income grow by 17 per cent and profit before tax rise to £700,000. These results reflect further healthy growth in business volumes.

The number of banking clients at June 2005 was 19 per cent higher than a year previously, whilst the loan book increased by 17 per cent compared with the first half of 2004 and customer deposits rose by 14 per cent.

Meanwhile, Arbuthnot Securities maintained the momentum achieved in 2004 and operating income rose by 21 per cent.

At the same time, a reduction in costs helped the division achieve a profit before tax of £0.5 million for the first half of the year.

Mr Angest said: "From this profitable base, we now intend to invest in the business and have recently added analyst coverage of the financials, mining, property and IT sectors.

"We have continued to increase our market share in institutional stockbroking and revenues derived from this activity grew by 51 per cent.

" The corporate finance team successfully completed seven transactions during the first half-year and have concluded a further three deals since July 1."

The company said it was keeping its interim dividend at


Mr Angest said its open offer to its shareholders in January had raised £3.8 million which would continue to be invested in the business.

This was reflected in the ten per cent increase in operating income for the six months to £27 million, he added.

Mr Angest said: "The first half of 2005 has seen continued progress by the group. Each of our businesses has achieved increases in operating income and I am particularly encouraged by the return of Arbuthnot Securities to profitability.

"Trading since the half year-end has been satisfactory, although the full year results will be strongly influenced by the level of client corporate activity, economic and market conditions, as well as the political and regulatory environment.

"Whilst our current corporate finance pipeline is healthy, the outcome and timing of transactions are always difficult to predict.

"Nonetheless, the board is cautiously optimistic about the outlook for the full year."