Britain's Northern Rock shrinks losses in 2009

Wednesday 10th March 2010

Nationalised mortgage lender Northern Rock's headline losses shrank in 2009, helped by rising net interest income and lower loan losses in the second half, though it said loan writedowns would stay high in 2010.

The bank, nationalised two years ago after it became the first major British victim of the credit crunch, said its underlying pretax loss shrank to £383.3m from £1.29bn a year ago.

Its statutory loss also shrank and the group said it posted a statutory profit of £466.7m in the second half, compared with a £724.2m loss a year earlier.

It took a loan loss impairment charge of just over £1bn in 2009, up from £894m a year before.

Earlier this year, the bank was officially split into a "good" bank - new mortgage and savings unit Northern Rock, which the government hopes to sell - and a "bad" bank, Northern Rock Asset Management, which includes existing mortgages and unsecured loans and could remain in government hands.

The results were published under the name of the "old", or "bad" bank, now Northern Rock Asset Management.

The group said arrears rose, climbing to 4.28 percent at the end of December, compared with 2.92 percent a year before. Excluding its "Together" mortgages, which handed buyers more than the value of their homes, arrears were 3.1 percent at the end of December compared with 2.25 percent.

"Loan loss impairment charges are expected to remain high during 2010, relative to historic norms, but below the level recorded in 2009," the bank said.

The bank's chief executive, Gary Hoffman, also followed in the step of other UK bank executives and waived his £700,000 bonus in response to public outrage over pay.

The British Treasury lifted its guarantee on most retail deposits with nationalised Northern Rock late last month, marking a milestone in the bank's turnaround.

The 100 percent guarantee, introduced in September 2007 to stop a run on the bank, had been under review since the start of the year. Its removal is key for suitors eyeing Northern Rock, as buyers will be keen to see that deposits stay in the bank without the government's safety net.

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