Northern Rock on a roll

MORTGAGE lender Northern Rock today got the banking sector results season off to a flying start, reporting record full-year profit and lending figures as it benefited from a buoyant housing market.

Pre-tax profits were up 18 per cent at £295.2 million, comfortably ahead of market predictions of £292m, while net lending surged 41.6 per cent to £5.1 billion. Chief executive Adam Applegarth said the company was remaining "focused on our key strengths", and was continuing to emphasise increased efficiency.

"Our results are good and demonstrate the success of our strategy of growth of low-risk lending, underpinned by low unit costs. Against a slowing economy, our strong performance is continuing."

Mr Applegarth said that throughout the year there had been an "underlying background" of possible economic slowdown, reflecting recessionary fears in the US and Europe.

However, UK consumer confidence had remained robust, fuelled by the seven successive reductions in base rates by the Bank of England.

Total gross lending was £8.853 billion, up 39.2 per cent on the previous year.

Mr Applegarth said the new year had also started well .

He said the residential lending market had remained buoyant during 2001 with house price inflation moderating as the

year progressed to levels that were becoming more sustainable.

The company achieved gross residential lending of £6.9bn, up 35.3 per cent, and net residential lending of £3.8bn, up 43.4 per cent, to take a 7.1 per cent share of the national market, up from 6.5 per cent.

Analysts have said that the housing market has come off the boil with interest rates expected to start inching up, but they added that Northern Rock’s ability to rein in costs and tap niche segments of the market make it resilient to a downturn.

The Newcastle-based bank has increased its market share through low pricing, benefiting from a growing trend of re-mortgaging among house owners.

Shares in Northern Rock, one of the smallest UK banks but also the most cost-efficient, have gained some 35 per cent over the past year . However, in early trading this morning they fell more than three per cent, or 21p, to 650p, mirroring weakness across the banking sector.