Northern Rock has benefited from an increased slice of the mortgage market to lift annual profits by 14 per cent to more than £500 million.
The Newcastle-based group said it achieved record levels of lending in 2005, and added that prospects for the year ahead were good, as economic conditions looked "fundamentally supportive" with interest rates set to remain low.
Northern, which posted underlying profits in line with expectations at £504.6 million, said its share of all mortgage lending rose to 8.1 per cent from 6.8 per cent in 2004.
Mortgage accounts three months or more in arrears were half the industry average at 0.39 per cent, broadly similar to a year earlier, it added.
Chief executive Adam Apple-garth said: "In 2005, Northern Rock continued to achieve its strategic targets and is well placed to continue to do so.
"Looking forward we are in extremely good nick."
He played down the prospect that Northern Rock might be involved in any UK bank mergers and acquisitions.
He said it had not received any takeover approach and was not interested in a purchase itself.
"Why would we want to take over somebody when we can pinch their business that we want?"
The company pointed out it started 2006 with a greater pipeline of future lending than a year ago, at £5 billion.
It was helped by a pick-up in the housing market in the final quarter of the year, and it said it expected the number of property transactions in 2006 to be broadly similar to the level achieved last year.
With house prices stabilising and demand from buy-to-let investors waning, Northern said its proportion of lending to first-time buyers rose to 24 per cent in 2005, against 21 per cent last time.
Overall, the company lent £23.62 billion on residential property in the year, up 18 per cent on last time.
The composition of its lending portfolio continued to be low risk, it added.
Mr Applegarth predicted house prices were likely to grow in line with average earnings, or 3-4 per cent annually over the medium term.
The profits performance was in line with the company's hopes for the year of growth around 15 per cent, give or take five per cent.
It set a similar target for the current year and added that gross residential lending in the UK in 2006 was likely to be similar to 2005 at about £300 billion.
Northern Rock's performance provided a solid start to the banking results season, which continues next month with annual figures from Barclays, Lloyds TSB and Royal Bank of Scotland.
The results from the sector are expected to show combined profits of £34 billion, although much of this is generated away from the UK high street.
Richard Hunter, head of UK equities at Hargreaves Lansdown, said: "These are good numbers from Northern and highlight it as being a very solid company."
In the retail savings market the group reported a record intake of funds of £2.8 billion, up sharply from £0.9 billion in 2004.
Northern Rock also announced a 13.6 per cent increase in its annual dividend to 30.1 pence a share, saying this was in line with its policy of paying out 40 per cent of "sustainable underlying attributable profits" and making sure the payout is covered at least 2.5 times by profits.
Assets grew by 25 per cent to £81.1 billion. ..SUPL: