Rock on target for £290m

NEWCASTLE success story Northern Rock produced fresh evidence that its low-cost, high-quality strategy is working. The bank, which converted from a building society four years ago, told investors profits for this year are likely to be about £290m. The figure is at the top end of City forecasts and marks an increase of more than 17% from 2000.

The group also said it has no exposure to Enron because it invests almost entirely in top-quality assets. Abbey National last week took a £95m provision against the collapsed US energy group.

Northern is confident about the outlook for the housing market, pointing out that low interest rates mean mortgages remain affordable.

The bank's net lending rose 40% from last year and its share of the mortgage market is about twice as large as its size would suggest. The group also has a pipeline of new loan business amounting to £2.4bn, against £1.9bn last year.

Northern intends to increase bad-debt provisions but stresses that this does not reflect any current deterioration in the credit quality of its mortgage book or its personal loan portfolio. Today's statement was issued ahead of traditional year-end meetings with analysts.