Banking group Abbey National has reported a two per cent fall in pre-tax profits after taking a hit from its exposure to collapsed energy firm Enron.

Abbey's corporate-based wholesale banking division wrote off £256m from its fixed asset investments, including £95m relating to Enron.

Write-offs from the wholesale bank were just £34m a year earlier as Abbey's pre-tax profits fell to £1.94bn from £1.97bn.

Reduced business volumes caused by the economic slowdown also hurt its First National retail and motor finance businesses, Abbey said.

Abbey chief executive Ian Harley said 2002 would be another challenging year as the group made changes within wholesale banking.

"We are re-focusing the wholesale bank and reducing its risk profile," he said. "This, combined with the uncertain outlook for the US economy, is expected to constrain profits growth in the wholesale bank in 2002."

Mr Harley said Abbey had appointed a new managing director to oversee the changed strategy.

He added: "Capital will only be invested in those businesses in the wholesale bank that are capable of delivering attractive returns on a fully risk-adjusted basis."

Abbey, which fought off a takeover bid from Lloyds TSB last year, said its showing on the high street had been strong.

It reported its best performance in the savings market since 1994 and said it had taken on the Big Four banks by opening 450,000 personal current accounts and increased its business banking account base by 55 per cent.

Group profit before provisions and tax rose six per cent to £2.45bn, while operating income was four per cent higher at £4.3bn.

In Abbey's core retail banking division, pre-tax profits gained two per cent to £1.3bn. The housing boom ensured Abbey's net mortgage lending figure of £5.2bn was 60 per cent higher than last year.