The Bradford & Bingley today defied market expectations and announced a 5.5 per cent rise in profits to £132.4 million for the first half of the year.

The building society-turned-bank also saw lending climb to a record £2.6 billion, despite a fall in income from investment products and a slump in estate agency revenues.

Underlying profits eased two per cent to £132.4 million but with no one-off costs this year bottom line pre-tax profits were up by 5.5 per cent. Analysts had been expecting a 3.1 per cent fall in underlying profits to around £130.8 million.

Income from sales of investment products slid 36 per cent to £21.4 million with customers choosing not to put their money in investments.

And estate agency revenues were down 16 per cent with fewer properties coming onto the market - transaction volumes across the market as a whole were off 14 per cent.

But growth elsewhere helped offset the decline, with B&B's mortgage broking revenues up by 31 per cent to £33.6 million as its Charcol and MarketPlace brands performed strongly.

And the company's lending business saw profits rise by five per cent to £109.4 million after specialist lending business Mortgage Express went "from strength to strength".

The specialist operation, which concentrates on niche markets such as buy-to-let and commercial customers, overtook its old building society mortgage book for the first time.

Chief executive Christopher Rodrigues said the growth in profits had been achieved in a "challenging market".

"The first half was marked by the continued rapid growth of Mortgage Express, our specialist mortgage lender, and its emergence as the largest part of our lending business," he said.

"We entered the second half with strong pipelines in lending and mortgage broking and a modest rebound in house sales, although investment product sales remain subdued."

Bradford & Bingley also announced today the appointment of group commercial director Ian Darby and group operations director Robert Dickie to the board as executive directors.

Ian Cheshire, chief executive of international and development at Kingfisher Plc, has joined the board as a non-executive director.