Highlights
Operating Performance
• Total underlying assets of £88.0 billion - an increase of 23.6 per cent from June 2005 underlying assets of £71.2 billion
• Record half one (H1) gross lending of £14.8 billion - an increase of 28.3 per cent, with record H1 net lending of £7.3 billion - an increase of 22.0 per cent
• Share of UK net mortgage lending of 14.3 per cent - similar to levels achieved in 2005
• Number of mortgage accounts three months or more in arrears at 0.45 per cent (31 December 2005 - 0.39 per cent) remain under half of industry average
• Retail savings intake of £1.7 billion - continuing to grow our retail funding franchise
Profits
• Statutory pre tax profits of £293.9 million, up by 13.3 per cent
• Underlying pre tax profits of £273.7 million, up by 14.4 per cent
• Underlying attributable profits of £173.5 million, up by 16.1 per cent
Costs
• Cost to underlying asset ratio improved to 0.32 per cent (2005 full year - 0.34 per cent)
• Cost to underlying income ratio improved to 28.9 per cent (2005 full year - 29.8 per cent)
Shareholder value
• Underlying return on equity increased to 21.5 per cent and 23.3 per cent on a statutory basis (2005 first half - 20.7 per cent and 21.6 per cent)
• Underlying EPS of 41.6p (2005 first half - 36.1p) - an increase of 15.2 per cent.
• Interim dividend per share of 10.9p (2005 first half - 9.4p) - an increase of 16.0 per cent
Social responsibility
• The Northern Rock Foundation - supporting charitable causes - to receive £14.7 million
Adam J Applegarth, chief executive, said: "Northern Rock has had a good first half in 2006. We achieved all of our strategic targets, with our performance very much in line with the guidance we gave at the beginning of the year. In addition, we have put in place some key building blocks for the longer term, including a preference share issue, a second Whinstone transaction as well as bringing on-stream major new IT systems.
"Another strong lending performance has contributed to an increase in underlying profits attributable to shareholders of 16.1 per cent, generating a return on equity of 21.5 per cent. These results are in line with our objective of seeing our rate of asset growth trending towards the centre of the 20 per cent + / - 5% range over the next two to three years.
"Given the proven robustness of our business model, we also announce today that we are changing our strategic target range for annual growth in underlying profits attributable to shareholders upwards to 20 per cent + / - 5 per cent, on a like for like basis (from 15 per cent + / -5 per cent) recognising that it is likely to take a couple of years to achieve the centre of this range."
