Northern Rock says profit to meet expectations

British mortgage bank Northern Rock's 2004 profit will meet market expectations amid strong trading despite a slowing housing…

British mortgage bank Northern Rock's 2004 profit will meet market expectations amid strong trading despite a slowing housing market, the company said today.

Northern Rock said it was gaining customers transferring from higher-rate rivals and refinancing consumer debt by switching it to their mortgage - a cheaper way of borrowing.

Analysts' consensus is for annual pre tax profit of about £429 million ($809 million), up 12 per cent like-for-like, Northern Rock said in a trading statement.

The bank has £5.4 billion of agreed new business, up 23 per cent on the same time last year. Northern Rock has experienced little disruption from new regulations for mortgage lenders and brokers, it added.

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Britain's once-booming housing market has slowed recently. The number of loan approvals for home purchases tumbled in October to their lowest in almost five years, the Bank of England said yesterday.

Northern Rock said mortgages taken out to move house would be subdued next year but that it would gain as people shop around for new deals and refinance consumer debt.

Credit quality has not deteriorated, the bank added. "We regard this statement as confirming that the fundamental business messages are unchanged, and that Northern Rock is on course to deliver better than average growth, at lower than average risk," Keefe, Bruyette & Woods analysts said in a note to clients.

Northern Rock also sought to reassure investors about the effect of new accounting standards on its reported profits. The bank said 2004 pretax profit would vary by less than 5 per cent when restated next year.

The standards "will have no material impact when 2004's results are restated next year", Applegarth said. Credit Suisse First Boston analysts said last week that the changes might cut Northern Rock's 2004 profit by up to 10 per cent.

Northern Rock is the first British bank to give guidance on the new accounting rules, which require lenders to spread upfront fees and discounts on mortgages over the life of the loan.