The bank Northern Rock is on track to meet analysts' profit forecasts for 2006 as its lending rose by a quarter in the last three months, and it will become more efficient, it said yesterday.

The bank said it was comfortable that its 2006 post-tax attributable profit will reach £352 million (€504 million), which it said was the consensus forecast from 19 analysts, up 14 per cent from last year.

The bank said net lending in the first quarter rose 26 per cent from a year earlier and its total lending pipeline - or deals waiting to be finalised - stood at £5.7 billion, up 15 per cent from a year ago and 8 per cent higher than at the start of this year.

"Volume growth remains robust, it all reads fine and it's typical Northern Rock," said James Hamilton, analyst at WestLB Panmure, adding that his main concern was the lofty valuation of the shares.

Analysts at Dresdner Kleinwort Wasserstein said the update backed its confidence in Northern Rock's "superior delivery" and said the bank's operating model justified a premium valuation for its shares.

Several dealers played down the prospect of a takeover, however, saying a predator would be unable to improve efficiency and would have to pay extra due to the bank's charitable foundation. Alliance & Leicester appeared a more likely target, they said.

Northern Rock, traditionally quick off the mark to release results and trading updates, said it expected to improve its ratio of costs to income in 2006.

Its cost:income ratio was 29.8 per cent in 2005, already the best for a UK bank.

"It's the most efficient retail banking business in Europe and in the mortgage market that's very important," Hamilton said.- (Reuters)