Pre-tax profit for the six months to August 31 rose to 471 million pounds ($776.8 million) from 420 million pounds in the same half a year ago -- beating analysts' expectations.

Analysts had expected a profit of about 445 million pounds, with forecasts ranging from 435 million to 463 million pounds.

"It basically shows why Bank of Scotland should be given the chance to run NatWest," said Robert Mackenzie at WestLB Panmure.

Bank of Scotland shares, which outperformed their sector by 50 per cent in the past five years, rose 5.5 pence or nearly 1 per cent to 751 pence. NatWest shares traded 2 pence higher at 14.53 pounds.

"The results will help their bid for NatWest by keeping the share price firm," said Tom Rayner, analyst at SG Securities.

The Scottish bank, which last week heavily criticisedNatWest plans to merge with Legal & General Plc, said it had itself discussed Bancassurance prospects with L&G.

But Bank of Scotland chief executive Peter Burt told a telephone news conference the bank decided not to go ahead because it saw "no merit" in such a tie-up.

"Quite simply it's something we explored and decided not to do," added Treasury and Managing Director Gavin Masterton.

Asked if Bank of Scotland's 22 billion pound bid for NatWestcould be increased, Burt said: "We believe that the offer we've made to the NatWest shareholders is a full and fair offer."

But analysts said it would have to raise the bid to see off potential rival suitors for NatWest, especially with Scotland's other major bank Royal Bank of Scotland seen waiting in the wings to launch a counter-bid.

"They'll have to raise their bid by at least 10 per cent. You don't get a major institution going on the basis of the offer at the moment," said Mackenzie.

The bank, which has promoted itself as very focused on costcontainment in its bid for NatWest also said it had cut its cost-to-income ratio to 48.2 percent from 49.9 per cent.

"Further encouragement for this exciting proposal is provided by our good interim results, which show that our clear focus has produced further growth in assets, productivity and profits," said Governor, or chairman, John Shaw.

The bank's loan growth was 22 per cent in the first half and bad debt provisions rose to 151 million pounds from 116 million a year earlier, but they were down slightly on the second half of 1998/99. Burt said he did not expect a slowdown in lending growth or any acceleration in bad debts in the second half. Analysts had expected bad debt provisions to jump to around 170 million pounds because of strong growth in the riskier area of unsecured personal lending.

Bank of Scotland increased its interim dividend 15 per cent to 4.6 pence per share, while earnings per share rose 11 per cent to 22.7 pence.

In the group's outlook, Shaw said business and consumerconfidence was strong, fears of deflation were subdued and inflation expectations were modest.

Bank of Scotland, which has been busy meeting institutional investors in NatWest this week, has impressed with its pitch but faced calls for a higher offer. Bank of Scotland is offering 1.6 new shares plus a 1.20 pounds loan note per NatWest share, valuing NatWest shares at 13.22 pounds and the company at 22.1 billion pounds. NatWest's market value currently stands at 24.3 billion pounds.