NORTHERN Rock, the building society turned bank, plans to create more than 250 jobs this year.

The jobs in customer service operations at Doxford Park in Sunderland and at its headquarters in Gosforth, Newcastle, are in addition to the 350 jobs created last year.

The bank revealed the expansion plans as it unveiled full-year profits, fuelled by all-time high levels of new business and lending.

Pre-tax profits in the year to December 31 rose 16.3 per cent to £250.1m, with gross lending up 54 per cent to £6.4bn and net lending ahead 86 per cent at £3.6bn - all record figures.

Leo Finn, chief executive, said the results were "excellent" against a background of intense competition and industry concerns over margins.

The market for residential lending - particularly mortgages - remained buoyant during 2000 despite the slowdown seen early in the year, he added.

The Newcastle group said it now had 6.5 per cent of the UK net mortgage lending market and that mortgage arrears were down to half of the industry average.

The bank said the house market was still buoyant but expected interest rates to come down still further, helping to push confidence even higher.

Northern continued to develop "multi-channel distribution" offering customers a choice of how they did business - in branches, by post, telephone, Internet or through financial advisors.

During the year, loans worth £545m were processed through Northern's website, split 60/40 between unsecured loans and mortgages.

The Internet accounted for around six to seven per cent of total business, but that is expected to grow further as Northern looks to upgrade its website later this year.

There are also plans to allow access to the bank through other means, such as the television, via the Open service on Sky Digital.

Mr Finn added: "The pressing issues for our business have been consumerism, e-commerce and, as ever, margins and volume.

"We have embraced transparency in our customer relations. E-commerce is being integrated and producing volume business. We have achieved record levels of lending and total income margin has stabilised."

Shareholders will pick up a total dividend of 15.5p, up 14 per cent on the year before.

A third of its members in the region, around 105,000 of the original 300,000 who received shares when the former building society converted to bank status, have held onto their shares. Looking ahead to the current year, Mr Finn said: "The strategy put in place to revitalise Northern Rock is working and has produced results that differentiate us from our competitors within the banking sector.

"We aim to continue to grow all our lending portfolios. Investment in systems, premises and people to ensure that we have the capacity to grow will continue, aiming to improve efficiency.

"We are confident of our prospects for the coming year."

l Leo Finn is due to retire from the board of Northern at the annual general meeting on April 24. He will be replaced as chief executive by Adam Applegarth, currently an executive director of the company