THE BANK holding Northern Rock’s toxic assets has announced it has paid back another £1bn of its loan from the Government in the first half of the year.
Northern Rock Asset Management - which was created when Northern Rock was split into two at the start of last year - reported underlying pre-tax profit of £344.1m, compared to £181.8m in the first half of 2010. Its ongoing costs dropped by 28%, going from £75m to £53.7m. The first half re-payment means it has given back £2.1bn in the last 18 months.
However, it remained cautious due to “continuing pressure” on the finances of homeowners nationwide.
Both NRAM and Bradford & Bingley fall under the management of holding company UK Asset Resolution, which is fully owned by the Government. UKAR said its merger with Bradford & Bingley was “progressing well”, and that state-owned Bradford & Bingley’s underlying pre-tax profit was up from £83.6m to £152m with ongoing costs down 10% to £52.6m.
NRAM returned to profit at the end of 2010, reporting a pre-tax profit of £277.4m for the full year to December 31 compared to a £313.4m loss in 2009. It is charged with repaying a Government debt totalling £48.7bn as well as working through mortgages worth £48bn on the Northern Rock side and £36bn in Bradford & Bingley. However, it is closed to new lending.
While it said “the vast majority” of customers were up to date with payments, the number of NRAM accounts three months or more in arrears rose by 6% from 24,683 to 27,010 in the first half of the year. The company said that was partly due to a change in its policy on how it worked with customers, but also due to “continuing pressures on household incomes set against the high amounts initially borrowed by some customers relative to their income”. Accounts in a similar position at Bradford & Bingley dropped 16% over the same period. A total of 87% of NRAM customers are up to date with payments, as are 93% at Bradford & Bingley.
Richard Banks, UKAR Chief Executive, said: “Our aim is to maximise value for the taxpayer and we have accelerated the repayment of Government debt with a further £1bn repaid in the first half of 2011.
“Arrears at NRAM are beginning to stabilise whilst arrears at B&B continue to reduce. However, we remain cautious about the future as there is continuing pressure on household finances.”