Nationalised Northern Rock bank posts mixed results

3rd August 2010, Comments 0 comments

British state-owned bank Northern Rock, which came close to collapse three years ago, reported mixed first-half results on Tuesday as the group readied itself for a return to the private sector.

Northern Rock was broken up into two parts at the start of this year, forming a so-called "good bank" that continues its healthy businesses and a "bad bank" management company to run down the remaining assets.

The "good bank", Northern Rock Plc, on Tuesday posted an underlying pre-tax loss of 140 million pounds (223 million dollars, 169 million euros) for the six months to June as it was hit by rising costs and slumping deposits.

In a further blow, retail savings deposits plunged 2.0 billion pounds to 17.6 billion pounds, after the government lifted a blanket savings guarantee in May.

However, the so-called "bad bank" division, Northern Rock Asset Management, announced that it made an underlying pre-tax profit of 167.3 million pounds in the first half as bad debts fell sharply.

That compared with a loss of 243.9 million pounds for the same period the previous year.

The "good bank" is widely expected to be sold to the private sector at some stage, while the "bad bank" is likely to remain in public hands.

"The company is well positioned to capitalise on future growth opportunities and is now able to compete on the same terms as other banks and building societies," said Northern Rock chief executive Gary Hoffman on Tuesday.

"The company continues to operate from a position of capital strength and remains committed to returning to private ownership when the time is right."

Hoffman said the figures represented a "good news story" for the taxpayer, with profits at Northern Rock Asset Management marking a key milestone.

The "bad bank" unit also repaid 300 million pounds of debt to the state but still owes 22.5 billion pounds to the taxpayer.

At the same time, bad debt -- or loans which have been written off -- fell to 277.7 million pounds in the first half, significantly lower than in both the first and second halves of 2009.

Northern Rock was taken into public ownership in early 2008 after it ran into severe funding problems because of the global credit crunch.

The group plunged into crisis in mid-September 2007 when it was forced to seek emergency assistance from the Bank of England. That sparked the first run on a British bank in recent history.

To avert meltdown, the British government agreed in December 2007 to guarantee all customer deposits and then later took the bank over directly to prevent its collapse.

© 2010 AFP

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