NORTHERN ROCK, the first of Britain’s banks to report profits, has overtaken Barclays to become the UK’s sixth-biggest mortgage lender after a record year for providing home loans.
The former building society yesterday unveiled full-year profits of £504.6 million, a rise of 14 per cent on the previous year, prompting it to raise its dividend by 13 per cent. The bank also made a £65 million contribution to its pension fund.
The rise in profits was driven by a 15.2 per cent increase in gross lending. At the net level — deducting mortgages paid back — lending was up 12.6 per cent at £14.6 billion.
Northern Rock claimed an 8.1 per cent share of UK gross mortgage lending, up from 6.8 per cent in 2004. At the net level its share rose to 14.4 per cent from 11.2 per cent.
Adam Applegarth, chief executive, said that the surge in lending meant that Northern Rock had moved up one place to become Britain’s sixthbiggest mortgage lender.
Advertisement
The bank said that it would expand assets by 20 per cent for the next two to three years, with an increase in underlying earnings growth at about the middle of its 10 to 20 per cent target. “We’d expect to see profit growth towards the centre and actually move back above the centre as we come to the back end of those three years,” Mr Applegarth said.
He pointed out that the bank’s mortgage arrears rate was substantially below the average in the sector. “We think [economic conditions] will remain benign, but perhaps not as benign as the last three years,” he said.
The bank had record net retail savings of £2.8 billion.
Nic Clarke, an analyst at Charles Stanley, said “the stock is attractive and therefore our recommendation remains to accumulate”.