Bank of Scotland results failed to impress the market, with the bank ending yesterday as the worst performer in the Footsie blue chip index.

Analysts were particularly worried about the squeeze on margins and also found they were unable to get answers to questions about some apparent accounting shifts.

They said the Edinburgh-based bank's full-year results were at the bottom end of expectations with underlying profit at £965 million sterling (€1.65 billion), compared with forecasts of around £980 million. Even that could have been flattered by a one-off boost of up to £40 million, they said.

Also, the furious rate of loan growth was not matched by extra deposits and the bank had to make up the shortfall, which left margins tight.

"They have a structural margin decline built in and Bank of Scotland is the most vulnerable to the potential turn in the economic cycle if interest rates continue to rise," said Mr Neil Baker of Dresdner Kleinwort Benson.

Dresdner cut its current year profit and earnings per share forecasts by more than 5 per cent to £1,039 million and 50.7p. It also recommended a switch into banks such as Royal Bank of Scotland and Barclays which, it said, offered "more balanced growth and much better value".

Nevertheless, Bank of Scotland's chief executive, Mr Peter Burt, remained upbeat. The results showed "just how good a business we've got when we can deal with NatWest and still grow those sort of profits over the year".

The bank said it booked £54 million in exceptional costs related to its failed takeover attempt of NatWest Bank. The battle ended in February when Bank of Scotland conceded defeat and NatWest fell to Edinburgh-based rival Royal Bank of Scotland.

Mr Burt added that lending growth had slowed to 15 per cent in the second half of the year because of a Year 2000 related slowdown. He said lending growth in the current year had picked up again, but was still likely to be less than the 19 per cent achieved in 1999/2000.