NORTHERN Rock is anticipating another successful year after recording 35 per cent growth last year.

The building society-turned-bank saw profits leap 18 per cent as it benefited from the booming housing market.

The group is known for its strategy of building strong lending growth from a lean cost base, which was responsible for pre-tax profits for the year to December 31 rising £50m to £326.2m.

The Newcastle firm believes external economic factors such as war worries and falling stock prices will largely pass it by as it works towards a growth target of 15 to 25 per cent for 2003-2004.

David Baker, chief operating officer, said the economy was still in a favourable position as far as the bank was concerned.

He said: "Other banks have exposures to the stockmarket through their life companies. We do not own life companies. All our money is invested in bricks and mortar."

He accused pessimists of getting the Iraq situation out of proportion. He said: "The impact of the war on Iraq ... depends very much on the severity and how long it goes on for, but people still need a roof over their heads and employment is still high."

The group could make another acquisition following its purchase of Legal & General's banking operations last year. The deal added £1.4m to Northern Rock's 2002 profits.

Northern Rock is still on course to create 1,000 jobs, announced last January, during the next few years as part of the first phase of a £90m expansion project at its headquarters in Gosforth.

About 4,500 people will eventually be employed in Gosforth, with a further 1,500 elsewhere. The firm has 4,000 staff nationwide.

Shareholders in the group will be paid a total dividend of 20.2p, up from 17.1p last year.

At the close of trading yesterday, Northern Rock shares had risen 10p to 578p.