HBOS says profits on track after $367.7 mln hit

LONDON (Reuters) - HBOS Plc HBOS.L, Britain's biggest mortgage lender, said it would take a 180 million pound ($367.7 million) hit on the value of assets due to the credit crunch but 2007 underlying earnings are on track to meet analysts' forecasts.

HBOS said underlying earnings per share should meet expectations of 106 pence, up from 100.5p in 2006. Its underlying 2007 pretax profit is forecast to rise 4 percent to 5.78 billion pounds, based on the average of 17 analysts polled by Reuters Estimates.

Britain's fourth biggest bank said it expected market turmoil to continue in the short-term and it "will remain prudent" in its lending.

The incremental cost of funding since August will hold back its net interest income growth in the second half and result in a "slightly lower" group margin for the year than previously indicated.

The bank said its net UK mortgage market share is expected to be 17-18 percent in the second half of this year, recovering back to near its traditional share of near 20 percent after dropping to 8 percent in the first half.

Deposit growth has been strong, and the bank said it had attracted savings inflow of 1 billion pounds in November alone.

HBOS said profits were on track after marking down the value of its traded investment securities by 180 million pounds, mainly due to floating rate notes and asset backed securities.

Its exposure to U.S. sub-prime mortgages was 430 million pounds at the end of November, down from 550 million at the end of August. This is expected to require a post-tax equity markdown of 30 million pounds, but would have no impact on reported profit or capital, the bank said.

Its insurance unit's full year profits will be reduced by 140 million pounds from the impact of weather-related claims in June and July, it said.

(Reporting by Steve Slater; Editing by Paul Bolding)