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Northern Rock reports heavy losses

Northern Rock reports heavy losses

Category: Economy

Updated: 04/08/2009
First Published: 04/08/2009

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 It is now over 6 months old so the content may be out of date.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 state owned Northern Rock bank has reported heavy pre-tax losses of £724.2 million for the first six months of the year, compared with a loss of £585.4 million during the same period of 2008.

The bank, which was nationalised in February 2008 after it needed to be publicly bailed out in 2007, said it had lent a gross total of £1.3 billion for mortgages in the first half of the year, and had reduced its full year target from £5 billion to £4 billion.

Furthermore, the proportion of the bank's mortgage loans currently more than three months in arrears is 3.92 per cent, well above the national average, although it said there has been an improvement in the number of home loans in early stage arrears.

In its results, Northern Rock said it is committed to assisting customers in difficulty wherever possible and has invested heavily in its debt management capabilities.

The publicly owned provider currently owes the Government £10.9 billion, up from £8.9 billion at the end of 2008. The business will borrow more after a restructure, subject to approval by the European Commission, which is hoped to come in the autumn.

Under the terms of the restructure, the business will be split into two separate entities. BankCo will hold savers' money and be responsible for new lending, while AssetCo will oversee existing loans and be responsible for paying back its government debt.

The new structure of the business and the capital injection will help the business undertake new lending, and will pave the way for a move back into private ownership, the bank said.

"The current environment continues to be challenging. However, against this backdrop Northern Rock is making progress against its revised plan and has delivered results in line with expectations," said Chief executive, Gary Hoffman.

"We anticipate receiving state aid approval in the autumn and the legal and capital restructuring of the company to be completed by the end of the year. This ultimately prepares for a return to the private sector."

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