Northern Rock reports 14 percent jump in H1 profits

Northern Rock reports 14 percent jump in H1 profits

	Published : Wed, 26 Jul 2006 12:35 By : Amy Watts Print this Story

LONDON - UK mortgage bank Northern Rock has reported that its underlying profits surged by 14 percent in the first half of this year. The bank said its profit before tax and exceptional items was £273.7 million in the six months ending June 30.

"Increased levels of housing transactions together with above anticipated levels of house price increases, skewed by central London, contributed to increases in gross residential lending of 27 per cent and net residential lending of 25 per cent in the first five months of the year," Northern Rock said in a statement. However the results were a little short of analysts’ expectations. The bank was a little skeptical of the direction the house price growth would take this yea, this joining Halifax and Rightmove in being cautious about the property market.

Northern Rock acknowledged that house prices grew faster than it expected in the first half of the year. It added that it expects first-time buyers to fuel growth this year. "We're in good nick, the market is in sound order and hasn't run away with itself, and we're one of the key performers within that market. We're comfortable with consensus," said Adam Applegarth, the bank's chief executive.

The bank, which has 14 percent of the mortgage market in the UK, said it expected to increase sales this year. Applegarth said the bank had achieved all its strategic objectives in the first six months. "In addition, we have put in place some key building blocks for the longer term, including a preference share issue ... as well as bring on stream major new IT systems," he said. Applegarth added that the housing market was hit by heavy demand and shirt supply. "There's some good fundamental support for the mortgage market. There's frankly not enough houses being built to satisfy demand and there's a good economic underpinning," he said.

Analysts at Keefe, Bruyette & Woods said Northern Rock had made a good beginning and was on target to realize its profits. "Northern Rock has aggressively exploited the better-than-expected mortgage market," they added.