Northern Rock chief Gary Hoffman says bank has turned corner

Mar 11 2010 By Andrew Hebden, The Journal

Analysis

NEVER has a £257m loss seemed like such an impressive return.

The numbers announced by Northern Rock yesterday came as a pleasant surprise and underline the extent of the progress that has been made at the bank.

What a shame then that the scale of the achievement - underlying losses were £500m less than Government expected - became to some extent lost in the predictable groans over bonuses.

Yet again the criticism about these payments seems misguided. As the Unite union pointed out, this is not a case of wide-boy City bankers pocketing the rewards of their reckless activities. Rather, it is a relatively modest reward for hard-working staff - most earning less than £25,000 - who have contributed to this remarkable turnaround.

Even BBC Business Editor Robert Peston - still blamed by some for the original run on the bank - seemed taken aback at the numbers announced by the Rock yesterday. He concluded there was now a real prospect that the Rock could deliver a profit to the taxpayer once it is returned to the private sector.

Whether this turns out to be the case depends to some extent on the way the economic recovery unfolds over the coming months. Mr Hoffman predicted yesterday that the Rock’s mortgage arrears had peaked in the first half of 2009, but things could yet be knocked off course by a double-dip recession or a rise in interest rates which could present problems to some of the Rock’s more vulnerable customers.

At least they can take comfort from the fact that their lender is now adopting a more measured approach to dealing with those who find themselves in trouble. It could prove a welcome safety net.