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Northern Rock: Q1 2005
Northern Rock’s trading update for the quarter to March 2005 said trading performance was strong and in line with its target of achieving annual growth in assets of 20% (+/-5%) and profit growth of 15%(+/-5%).
The bank reported there has been a slowdown in both consumer demand and the housing market following the interest rate rises of 2003 and 2004. Northern Rock expects the gross mortgage market to contract by 11% to £260bn this year from £291bn last year.
First quarter loan growth has been strong with net lending 54% ahead of last year, albeit from a low base. The loan pipeline of agreed business at the end of the first quarter stands at £5bn - 7% higher than the same time in 2004 but slightly below the £5.1bn at the beginning of the year.
The bank reports no deterioration in credit quality, stable flow of funding and an improving cost:income ratio, all which are positive. The bank seems confident of meeting consensus expectations for 2005 and at this stage there is little to suggest that this confidence is misplaced. Trading at 798p the prospective PE is 9.9x on 2005, in line with the sector. The yield is 3.7%.
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