LONDON -- Abbey National PLC, the fourth-largest British bank, will show the highest proportional increase in bad-debt provisions among the top banks when it announces its half-year results next week.

Abbey, which has converted from a building society charter but remains mainly in mortgage lending, is expected to more than double its loss provisions to about $251 million for the six months through June 30.

Pretax profit for the same period is expected to drop 11% to about $531 million.

By comparison, analysts say Barclays Bank PLC will show the next highest rise in provisions, up 27%.

Still a Minor Factor

Although loan-loss reserves will have shaved several million pounds off profits, Abbey's provisions as a percentage of its total loans are extremely small compared with those of its rivals.

"Bad debts are a much higher percentage of lending at the big four" commercial banks - Barclays, National Westminster, Midland, and Lloyds - said analyst Nick Dobby at Robert Fleming Securities. "Another plus is that the underlying retail margin is improving as the savings rate is falling faster than the mortgage rate."

But Mr. Dobby said the interest margin was likely to fall to 2.2% from 2.8%, as Abbey continued to put high quality, lower-yielding assets on its balance sheet.

Dividend Rise Expected

Despite sharply higher bad-debt provisions and a drop in profits, Abbey is expected to be one of the few banks to offer an increased dividend at the half year.

But Abbey's basic woes are seen likely to persist throughout the year, with analyst Chris Wheeler at Lehman Brothers forecasting a 3% decline in profit to $1.16 billion for the full year. He said this drop would appear "moderate" compared to that of competitors.

"Record levels of arrears and the rising cost of repossessions seem likely to result in a decline in pretax profits at both the interim and full-year stages," he said.

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