National Westminster Bank yesterday outstripped City expectations as profits soared by 49 per cent in the first half of the year.

The bank said the profits were due to the radical restructuring process being carried out at the company which had allowed it to focus on its core businesses.

NatWest said the restructuring was on track, but warned that there would be a "further slowing of the (British) economy" towards the end of the year and into 1999 which would affect business.

The company also announced that it had made a further £65 million provision to pay for the process of redressing its pensions mis-selling cases.

Pre-tax profits for the six months to June 30th were £967 million, up from £648 million last year.

The company's business in the UK saw profits rise by £78 million to £555 million, despite the pensions mis-selling provision and an increase in restructuring costs of £18 million.

The increase in restructuring costs was widely due to the reorganisation of the company's head office and cuts at its corporate arm Greenwich NatWest, where staff numbers fell by 3,000.

During the period, the bank sold a substantial part of its equities businesses formerly known as NatWest Markets to Deutsche Morgan Grenfell and Bankers Trust.

The ongoing corporate business made a pre-tax profit of £55 million.

The chief executive, Mr Derek Wanless, said NatWest was halfway through its five year restructuring of the retail banking operations, which includes centralising the processing operations of its branch offices.

He said that, with 31 of the planned 55 central processing centres up and running, the bank was on track to reduce costs to 1997 levels by the year 2000.

Retail staff levels had been cut by 3,500 so far in the programme, which is aimed at reducing numbers by 10,000.

He added that NatWest had been carrying out a "rigorous cost control" programme in retail banking which had held costs flat for three half year periods.

The operations saw an improvement in credit cards and insurance, which made up for cuts in fees for money transmission and unauthorised borrowing.

Mr Wanless said: "During 1997 we took vigorous action to change the shape and direction of the group.

"This has allowed us to concentrate on our core businesses, and the results we have achieved in the first six months of this year show the underlying strength of these operations."

He added that debt provisions had fallen by £79 million to £46 million as a result of the recent strength in the economy and a selective approach to lending.

"Although we would caution that a further slowing of the economy towards the end of this year and into 1999 will affect some parts of our business, our credit quality measurements are currently stable," he said.

He added: "The economy is already slowing due to higher interest rates and the strength of the pound. We will not see a recession but a slowing down and NatWest is too big in the UK economy to not be affected by that."