It was not quite the upbeat statement that shareholders, and the rest of the high street banks, had been hoping for.

Although HBOS said this morning that trading was satisfactory to the end of last month, this was offset by rising arrears, particularly in the buy-to-let and self-certified lending that makes up almost 26 per cent of the bank's loan book.

HBOS is yet to write down any of its exposure to the US mortgage market. It argues that, because the mortgages underlying the securities in which it has invested are not impaired, fair value adjustments to their value are a more accurate representation of the impact of the credit crunch. At the same time, it holds the majority of these assets in its treasury, so even the value adjustments downwards do not impact on its profits or regulatory capital.

Nevertheless, it has reported a £2.8 billion reduction in value of the assets in the first five months of the year, compared to £736 million last year.

The corporate side of the business offered no relief. HBOS has a £4.2 billion exposure to housebuilders and has seen £100 million of its £200 million equity investment in the troubled sector wiped out since the beginning of the year. This situation is only likely to worsen in line with the plunging housing market.

HBOS said that house prices will fall by up to 9 per cent in 2008 but, more worryingly, became the first bank to mention unemployment, predicting a "modest rise".

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive