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‘Good’ Northern Rock bank posts a loss

‘Good’ Northern Rock bank posts a loss

Category: Banking

Updated: 03/08/2010
First Published: 03/08/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The good Northern Rock bank has today announced a pre-tax loss of £142.6 million, while the bad part of the bank has returned to profit.

The now nationalised lender made headlines at the outset of the financial crisis, when savers queued to withdraw their funds from the bank.

After being saved from going to the wall by the Government's bank bail-out, Northern Rock was split into two parts.

Northern Rock PLC holds savers' deposits and has undertaken new lending, while Northern Rock Asset Management (NRAM) holds most of the bank's old mortgages and unsecured loans.

NRAM has posted pre-tax profits of £349.7 million, a marked turnaround from the £724.2 million loss that it incurred during the same period in 2009.

However, the good part of the bank has posted a loss, although it said that the figures were in line with expectations.

Gross residential lending at Northern Rock PLC was £1,975 million in the first half of the year, with an average loan-to-value of 60% representing the lender's prudent approach to new business it undertakes.

This was also shown by the just 0.07% of mortgage accounts that were in three months or more of arrears at 30 June 2010.

The company reiterated its goal of moving away from Government ownership, although it stressed it would only do so when the time was right, and in the best interest of taxpayers.

Gary Hoffman, the chief executive of Northern Rock PLC, said that the good bank would complete its separation from NRAM in the second half of 2010, with costs significantly reducing as a result.

"However, conditions remain challenging across the sector," he warned.

"The mortgage market remains relatively subdued, with low interest rates having an adverse effect on banks which are mainly funded by retail deposits.

"The Company is well positioned to capitalise on future growth opportunities and is now able to compete on the same terms as other banks and building societies."

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