National Westminster Bancorp, the $22 billion-asset U.S. unit of Britain's National Westminster PLC, reported Thursday second-quarter net income of $35.8 million, up 18% over earnings in the first quarter.

In the quarter a year earlier, the bank had a loss of $85.1 million.

The continued improvement in earnings at NatWest this year comes after hundreds of millions of dollars in losses over the preceding three years.

However, the bank now stands to benefit from hundreds of millions of dollars in tax deductions for the losses.

|Underlying Strength'

John Tugwell, chairman and chief executive of the U.S. unit, said the improvement "demonstrates the underlying strength of our core business."

Second-quarter net interest income was $186.5 million up from $180.5 million in the second quarter, and noninterest income totaled $77.2 million, up from $60.6 million last year.

A large portion of the increase in noninterest income came from the sale of investment securities and the balance from a growth in loan-and deposit-related fees. Newly introduced annuities products also built noninterest income, the bank said.

Operating expenses rose slightly to $195.8 million from $189.4 million last year.

Mr. Tugwell said that the bank expected "further improvements."

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