Northern Rock upbeat despite margins worry

British mortgage bank Northern Rock said strong trading had continued in recent months and it was comfortable with analysts' …

British mortgage bank Northern Rock said strong trading had continued in recent months and it was comfortable with analysts' forecasts for underlying profit growth of 12 per cent this year.

Northern Rock said it was also confident on prospects for next year, but its shares slipped as the traditionally upbeat firm did not raise guidance and also cited some pressure on its income margin.

Northern said it would deliver on all its strategic targets for 2005 and was comfortable with analyst forecast for 2005 pretax profit of between £468 million and £509 million and an average of £494 million, up 12 per cent from 2004's pro forma results.

The bank has defied a tough UK housing market this year, but stagnant house prices and a slowing economy have tested its claim that it can maintain growth by taking market share.

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Northern said it expected the number of UK home moves in 2005 to be towards the lower end of the historical trend, with similar volumes expected next year.

It said there were early signs that first-time buyers were starting to return to the market, which may put upward pressure on its forecast.