Abbey National shares fell ten per cent after the bank warned full-year pre-tax profits would be substantially short of expectations.

The mortgage lender blamed the decline on the impact of writing off debts in its wholesale banking unit, responsible for loans to companies.

The troubled division was largely at fault for a two per cent fall in profits last year and its exposure to high-risk lending has continued to cause problems.

As a result, the company said pre-tax profits this year would be down on the £1.9 billion expected by the market and recorded last year.

Further gloom for shareholders was that Abbey's rate of dividend growth would not match last year's ten per cent improvement.

Abbey said a new management team was in the process of overhauling the wholesale division and that had resulted in a more conservatory and anticipatory approach to provisions for bad debts.

In last year's figures, the wholesale bank unit's exposure to collapsed energy firm Enron was among reasons for £256 million worth of write-offs.

Abbey said it was likely to match that figure in the first half of this year before seeing an improvement in the second half as its more cautious approach began to show through.

The company said: "We believe this year will see the peak in terms of provisioning and write-offs in the current cycle, with next year returning to a more normal level.

"As a result, profits for the year are now expected to be considerably below last year's levels."

Chief executive Ian Harley said the performance of the company's remaining businesses had so far been in line with hopes.

The update from Abbey came a day before it was due to brief City analysts on the performance of its wholesale banking division.

Alex Scott, of Seven Investment Management, said: "A lot of these problems are Abbey-specific rather than affecting the other banks."