Northern Rock aims to one of the bigger players

The prediction came as the bank said pre-tax profit for the six months to 30 June rose 14% to �200.3m ($373.8m).

The Newcastle-based bank said its share of the UK mortgage lending market was up to 8.4%, from 7.8% in 2003.

Chief executive Adam Applegarth told Reuters news agency it wanted to be one of the "five or six big players".

Mr Applegarth said he saw the shake-up taking place within the next five years, and that Northern Rock might have to buy a bigger rival to be among the survivors.

The house purchase market should continue to slow but remortgage activity will remain buoyant Adam Applegarth, Northern Rock chief executive

He said medium-sized, inefficient lenders would be swallowed up leaving the big players and nimble smaller lenders.

Asked if Northern Rock, the UK's ninth-largest bank by assets, would buy a bigger competitor, Mr Applegarth said, "I wouldn't want to overplay that but it is conceivable."

'Healthy market'

Looking at the health of the UK housing market, Mr Applegarth said the market "should continue to slow but remortgage activity will remain buoyant".

He said transaction numbers had already started slowing, but that house prices growth had been slower to cool.

His view appeared to be supported by the findings of the latest housing market survey from the Royal Institution of Chartered Surveyors (Rics).

Rics said its members had reported house prices rising at their slowest rate for 10 months.

However, Mr Applegarth said the market remained in a healthy condition underpinned by relatively low interest rates, low unemployment and a restricted supply of new housing stock.

His comments came as the British Bankers' Association and Council of Mortgage Lenders both said that mortgage and unsecured personal lending had resumed rising in June.

Northern Rock's total net lending hit a high of �5.1bn - a 30% rise since December - in the first half of 2004.

Growth targets

The Northern Rock's half-year profit was slightly below analysts' consensus, but the bank said it was comfortable with its year forecasts as long as the cost of raising money on the financial markets does not rise further.

Mr Applegarth said with the company would continue to achieve the volumes of lending it required to reach its "strategic growth targets".

He added: "Our published results at the half-year stage are encouraging, even more so when looking at the underlying performance and the fundamental drivers of the business."