Northern Rock's "bad-bank" returns to profit
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Northern Rock Asset Management or the “bad-bank” section of the old business has recorded a pre-tax profit of £349.7m for the first half of 2010.
The return to profit compares to a loss of £724.2m for the same period last year.
But Northern Rock’s “good-bank” recorded a loss of £142.6m in its interim results.
This is the first set of results since the two businesses were split.
Total income for NRAM improved to £719.6m in the six months to June 30 compared with negative income of £11.1m in the first half of 2009. The firm says impairment charges and repossession numbers have fallen during the period.
Northern Rock plc did not trade in the period to December 31, 2009 because it was a new company. It recorded gross residential lending of £1.9bn in H1 2010, which includes £340m of mortgage retention business.
The bank recorded an average loan to value of 60 per cent for lending completed in the first half of the year while the average LTV of the total mortgage book was 59 per cent at June 30.
Chief executive Gary Hoffman says Northern Rock plc has made “solid progress”, adding that financial performance is “in line with expectations”.
He says: “The business is stable, well capitalised and a safe home for retail deposits - factors which allowed us to successfully release the Government retail savings guarantee well ahead of the original plan.
“During the second half of 2010 the Company will substantially complete its full separation from Northern Rock Asset Management and the costs of the retail savings guarantee will significantly reduce.”
But he warns conditions remain challengin, saying: “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. Northern Rock continues to operate from a position of capital strength and remains committed to returning to private ownership when the time is right.”
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