Former building society Northern Rock said today it was in “excellent shape” to cope with a slowing housing market as it posted a 22% rise in first half profits.
The group said increased remortgaging activity would more than compensate for an expected continuation in the slowdown of house price growth across the second half of 2003.
Remortgaging activity and initiatives to boost customer retention helped the Newcastle-based bank drive net lending up more than 11% to a new record of £3.9bn.
And pre-tax profits jumped to £186.2m in the six months to 30 June from £152.6m in the same period last year.
However the figure was boosted by £7.3m from the sale of its credit card business to the Co-operative Bank in May.
Underlying profits were up 17% to £179.2m, just ahead of expectations.
Finance director Bob Bennett said that remortgaging had boosted volumes, while profitability had benefited from increased efficiency.
While high house prices have put some first-time buyers off, the group said existing property owners had taken advantage of the value of their homes and low interest rates to remortgage.
Meanwhile, the company’s policy of allowing existing customers to transfer to any product available to new borrowers meant more customers were staying with Northern Rock if they did decide to remortgage their homes.
The group said remortgaging levels would remain buoyant while it expects house price growth to slow to around the growth in average earnings.
Chief executive Adam Applegarth said: “Whilst we still expect the housing market to slow further, our small size, large cost advantage, ability to generate gross lending and retain existing customers, all stand us in excellent shape to continue to deliver for the foreseeable future.”
Bennett added: “All this talk about the death of the housing market or the boom about to go bust has been greatly exaggerated.”
He said the group welcomed a move back to more sustainable levels of growth.
Northern Rock said it had been able to retain around 60% of potential remortgage customers and 50% of those who moved house.
References: EGi News 17/07/03
