Bank of Scotland's failed bid to buy NatWest didn't derail its profit growth over the last year with earnings hitting new records, it has revealed.

The group, which lost out to rival Royal Bank of Scotland in the high profile race for NatWest, said profits before tax and one-off items hit £965 million in the year to February 29.

This compared to £850 million the previous year.Sir John Shaw, governor of the bank, said: "It is a tribute to the management and staff that the bank has achieved excellent results in a year in which we pursued the high profile bid for NatWest."

Meanwhile, Peter Burt, group chief executive, dampened speculation of any fresh takeover bids in the near future.

He said: "I am not sure I see any opportunities in the UK, though obviously we watch what is going on."

Mr Burt highlighted its internet mortgage business launched in the Netherlands late last year as a pointer to its future expansion.

The business, Eubos, has attracted 2,500 potential customers and Bank of Scotland is considering rolling out the service to other European markets.

In the UK the group saw particularly strong growth in lending to consumers and its mortgage book rose to record levels at £15.9 billion.

Looking forward the bank said it expected the UK economy to continue to grow and the UK housing market to remain 'robust' despite the widespread expectations that interest rates are set to rise this year.

Mr Burt also said he expected Bank of Scotland to lure customers away from the merged NatWest and Royal Bank of Scotland.

In a separate move today it announced it was to form a new fund management business.

Bank of Scotland will take a significant minority stake in the venture which will manage its venture capital funds.

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