UK bank Northern Rock reported a 13 per cent increase in annual profits today, in line with expectations, and said it was confident about prospects for 2005 despite a continued housing market slowdown.
But the upbeat tone failed to allay concerns about the outlook for Britain's mortgage market and shares in the bank dropped over 1 per cent in the absence of any positive surprises.
Kicking off the UK earnings season, the mortgage lender said pretax profit rose to £431.2 million from £387 million in 2003.
Chief Executive Adam Applegarth told reporters the bank's strategic targets for 2005 and beyond remained unchanged despite a cooling off in house prices, mortgage volumes and loan approvals on the back of five interest rate increases.
"It's because we are small, are the lowest cost operator in Europe and are the best at retaining our customers that we can carry on performing even though the market is a bit quieter," said Mr Applegarth, adding that he expected to gain further market share.
Northern Rock said it was starting 2005 with a £5.1 billion opening pipeline of lending, up 32 per cent from the start of 2004 and said its share of UK net mortgage lending was 11.2 per cent, up from 7.8 per cent in 2003.
The Newcastle, north-east England-based lender has posted record profit each year since the former building society listed its shares in 1997.
Despite the recent slowdown in the UK housing market, the bank has managed to continue to take market share by soaking up remortgaging business and retaining customers through low prices.