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The country's biggest mortgage lender, HBOS, has said that it expects to deliver a "robust" financial performance in 2007, despite its share of the home lending market slumping during the first six months of the year.

In a trading statement the Edinburgh-based bank admitted that a retention strategy introduced for its mortgage business in the latter half of last year had "not delivered the anticipated benefits".

HBOS, whose subsidiaries include Halifax and Bank of Scotland, subsequently warned that its net share of new mortgages was likely to be less than ten per cent for the first half.

But following "corrective action" taken during the second quarter, the bank is now confident of returning to its usual share of between 15 and 20 per cent during the second half of 2007.

"After a slower first quarter for net lending, we are now seeing an improved performance, having taken corrective action in the second quarter," HBOS said.

Despite a drop in mortgage lending, Britain's fourth biggest bank remains upbeat about its overall prospects and expects to achieve underlying earnings per share of about 110.8p for the full year – up by more than ten per cent on 2006.

HBOS, which said each of its divisions except retail were experiencing double digit growth, added: "The repatriation of surplus capital through our buyback programme is progressing well with share buybacks currently totalling £262 million."

Nonetheless the bank acknowledged that, like its UK rivals, it had seen an increase in the number of customer requests for refunds on money paid in charges for current accounts as a result of publicity surrounding the Office of Fair Trading's probe into penalty fees.