Northern Rock reveals heavy losses
State-owned Northern Rock has reported hefty losses in the first six months of 2009 after bad debts tripled from the same period last year.
The lender, which was nationalised in February 2008, saw first-half losses hit £724 million, up from £585 million for the same period a year ago.
Some 3.92% of its mortgages were more than three months in arrears during the period - significantly higher than the national average of 2.39%.
However, the lender reported a fall in mortgages that were less than three months in arrears.
Overall, repossessions are down from 3,620 to 2,522 due to efforts to help homeowners.
Northern Rock is currently in the process of separating its business into two distinct divisions. One side - the ‘good bank’ - will hold savers’ money and oversee new lending, while a ‘bad bank’ will hold many of the existing loans and repay the government the money it borrowed to keep itself afloat.
Gary Hoffman, chief executive of the group, says the bank will hopefully be back in private hands when the restructuring is complete.
"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."
Looking behind the headline figures, the underlying loss at the bank improved from £443 million a year ago to £270 million, mainly due to customers being charged higher interest rates.
However, bad debts rose to £602 million in the first half of 2009 from £191.6 million in the same period last year, with similar levels expected for the second half of this year.
“Arrears” tend to be associated with debt. If you fall behind and miss payments on any outstanding debt, the amount you failed to pay is an arrear – the amount accrued from the date on which the first missed payment was due.