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Northern Rock Says Profit Will Not Meet Expectations

British mortgage lender Northern Rock said Wednesday that its full-year profit probably will not match analysts' expectations after the company misforecast interest rates. Its shares dropped 11%.

Underlying profit will probably increase by about 15% compared with the previous year, the company said in a statement. Analysts had forecast a gain of 17% to about 430 million pounds ($858 million; 638 million euros).

Northern Rock shares plunged 11% to 848 pence ($16.95; 12.59 euros) on the London Stock Exchange.

"It remains to be seen whether the initial share price reaction has been overdone," said Richard Hunter, a broker at Hargreaves Lansdown. But "the damage will take some time to repair."

Chief Executive Adam Applegarth said the company would "continue to concentrate on adding high volumes of prime quality residential mortgages" to its balance sheet.

"Looking forward, we will add revenue from the growing program of manufacture, distribution and disposal of assets that we do not want to hold on the balance sheet in the long term," Applegarth said.