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Northern Rock’s bad bank makes £257m loss

Northern Rock Asset Management has revealed 2009 losses of £257.5m up from Northern Rock’s losses of £1.36bn in 2008.

NRAM, the newly created ‘bad bank’ which holds much of the historical mortgage book, wholesale debts and Government liabilities on its books, had impairment charges of £1.05bn as well as a £200m Government loan clawback in 2009, but had income of £1.1bn.

As Northern Rock, the bank’s gross residential lending rose to £4.2bn in 2009, compared with £2.9bn in 2008. It says the average loan to value of the new mortgages was 56 per cent

On January 1, NRAM ceased new mortgage lending and transferred a £10.3bn mortgage book over to the new retail bank, Northern Rock plc. NRAM now retains a £50bn mortgage book but no retail deposits.

Three-month arrears in its mortgage book rose through 2009 to 4.28 per cent, up from 2.92 per cent in 2008. Excluding the 125% LTV Together mortgage book, three month arrears rose to 3.1 per cent, up from 2.25 per cent in 2008.

NRAM says its forbearance measures have allowed 1,700 people to stay in their homes in 2009 through repossession rescues. IN 2009 it repossessed 2,061 properties, down from 3,620 in 2008.

NRAM owes the Government £14.3bn after it increased aid to Northern Rock by £8.5bn upon completion of the restructure.

Chief executive Gary Hoffman has waived his 2009 bonus but is in line for a “long-term incentive” should Northern Rock return to profitable privatisation.

NRAM will also be offering £14.7m in 2009 bonuses to staff. Senior management will also receive bonuses, which will be paid in three equal annual installments beginning this month and will be subject to clawback.

Hoffman says: “It is over two years since Northern Rock entered public ownership. During that time the Company has made good progress in pursuit of its objectives that include repayment of State aid, delivering value for taxpayers and ultimately a return to private ownership. We are looking forward, not back and we are on the right trajectory.”

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