Northern Rock uncovers £724m loss as bad loans treble

Northern Rock uncovers £724m loss as bad loans treble




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The state-owned bank Northern Rock has reported first-half losses of £724 million, after it emerged that it has written off £602 million of loans since the start of 2009. 

The number of bad loans the lender holds has tripled in six months, with Northern Rock adding that currently 3.92% of its mortgages are in arrears of over three months.

 

Northern Rock was fully nationalised last February, after taking emergency funding of £26.9 billion from the Bank of England. It still owes the Government £10.9 billion, having paid off a large amount through mortgage redemptions, as it urged borrowers to choose deals elsewhere.

 

There are now plans to split the lender into a “good bank” and “bad bank”, with the former holding some of the existing mortgages and carrying out new lending and the latter designed to hold the bad loans and repay the state funds.

 

Gary Hoffman, chief executive of Northern Rock, has said that results are in line with expectations, adding: “We anticipate receiving state aid approval in the autumn and 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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