Banking giant Abbey today claimed its ambitious relaunch was on track but admitted trading profit was running around 15 per cent down on the first half of 2003.

The bank, which has its northern headquarters in Bradford, said the cost of the rebranding as 'Abbey' and associated marketing campaign had increased costs.

But Abbey has also cut down on its other spending with the roll-out of its off-shoring policy with a pilot programme to shift data processing work from Glasgow and Edinburgh to Bangalore, India.

Unions fear the off-shoring programme could lead to jobs moving from Bradford to India next year but the company would only confirm it had plans to "intensify" its cost-saving initiatives.

In a statement to the City today, chief executive Luqman Arnold said the business was on course towards making £200 million worth of annual cost savings.

But he admitted the changes would "remain a drag on performance" in 2004.

However, Abbey did report a 55 per cent increase in net mortgage lending to £6.5 billion in 2003 so far - giving the bank almost a ten per cent share of its core market.

The three-year change programme has been designed to refocus Abbey's attention on mortgages. Mr Arnold said: "2003 is about putting the foundations in place that will position Abbey as a strong and credible competitor in the market, and help pave the way to a return to growth in the second half of 2004. We are eight months through our three-year change programme - and we are on track."

"The scale of the changes we are implementing does bring with it execution risk, and will, as we predicted at the interim stage, have a short-term impact on business performance and service levels through the first half of 2004.