• Deposits down by £2bn since state-backed guarantee was pulled
• Losses continue at 'good bank' but 'preparations continue for privatisation'
• 'Bad bank', which holds existing mortgages, makes £349m profit
Almost £2bn of savings have been pulled out of Northern Rock as a result of the government stopping its 100% guarantee for deposits and the nationalised lender's move to shut its offshore businesses.
The withdrawal of funds was revealed today as the Newcastle-based bank provided mixed news for the taxpayer.
The so-called "good bank" – which is being primed to compete with the high street banks – remained loss-making in the first six months of the year, while the "bad bank" – shut to new business and containing existing mortgages – shot into profit during the same period.
Almost three years since the onset of the credit crunch which eventually led to the nationalisation of Northern Rock in February 2008, Northern Rock (Asset Management) – the bad bank – recorded a pre-tax statutory profit of £349m compared with a £724m loss a year ago. On an underlying basis, the profit was £167m compared with a £243m loss a year ago .
At the good bank – known as Northern Rock plc – the loss was £142m, which chief executive Gary Hoffman said was "in line with our expectations".
He said preparations were continuing to return the business to the private sector but that this would only be done "when the conditions are right to do so, in the best interests of the taxpayer".
He reiterated that there was "no deadline" for a sale of Northern Rock. "There is no timetable. There is no process," he said.
Some 650 job cuts were announced in June and the headcount has fallen from 6,500 before the bailout to 3,750, including 1,250 being transferred to Bradford & Bingley. Northern Rock (Asset Management) is in the process of being merged with the nationalised mortgage book of Bradford & Bingley.
The savings balance at Northern Rock plc fell to £17.6bn from £19.5bn during the period, which the lender said was partly due to the removal of the 100% guarantee on savings that the government put in place following the run on the bank in September 2007 and also due to the decision to close its Guernsey business.
Hoffman said he was not concerned about the outflow of funds. Some £400m were due to the closure of Guernsey and he said that other deposits had been at expensive rates. "We regard our retail deposits as stable," he said.
Hoffman said that Northern Rock plc was "well positioned to capitalise on future growth opportunities and is now able to compete on the same terms as other banks and building societies.
"Northern Rock is focused on providing excellent service to its customers and meeting their needs. The company continues to operate from a position of capital strength and remains committed to returning to private ownership when the time is right."
Northern Rock plc is largely funded by retail deposits while Northern Rock (Asset Management) is backed by a government loan, which reduced to £22.5bn from £22.8bn during the period, as well as wholesale funding, such as its Granite vehicle. Hoffman, who is also chief executive of the asset management business, said the results were "encouraging". He said: "The company is continuing to show improving profitability and 90% of the mortgage book remains fully performing."
Even so, the number of mortgages in arrears rose to 22,837, up from the 22,564 in arrears at the end of last year. This represents 5.64% of the mortgage book, although if the controversial Together products are excluded the arrears fall to 4.68%. Together loans allowed homeowners to borrow up to 125% of the value of their property.
Source: Northern Rock savings fall but 'bad bank' is in the black | Business | guardian.co.uk
• Losses continue at 'good bank' but 'preparations continue for privatisation'
• 'Bad bank', which holds existing mortgages, makes £349m profit
Almost £2bn of savings have been pulled out of Northern Rock as a result of the government stopping its 100% guarantee for deposits and the nationalised lender's move to shut its offshore businesses.
The withdrawal of funds was revealed today as the Newcastle-based bank provided mixed news for the taxpayer.
The so-called "good bank" – which is being primed to compete with the high street banks – remained loss-making in the first six months of the year, while the "bad bank" – shut to new business and containing existing mortgages – shot into profit during the same period.
Almost three years since the onset of the credit crunch which eventually led to the nationalisation of Northern Rock in February 2008, Northern Rock (Asset Management) – the bad bank – recorded a pre-tax statutory profit of £349m compared with a £724m loss a year ago. On an underlying basis, the profit was £167m compared with a £243m loss a year ago .
At the good bank – known as Northern Rock plc – the loss was £142m, which chief executive Gary Hoffman said was "in line with our expectations".
He said preparations were continuing to return the business to the private sector but that this would only be done "when the conditions are right to do so, in the best interests of the taxpayer".
He reiterated that there was "no deadline" for a sale of Northern Rock. "There is no timetable. There is no process," he said.
Some 650 job cuts were announced in June and the headcount has fallen from 6,500 before the bailout to 3,750, including 1,250 being transferred to Bradford & Bingley. Northern Rock (Asset Management) is in the process of being merged with the nationalised mortgage book of Bradford & Bingley.
The savings balance at Northern Rock plc fell to £17.6bn from £19.5bn during the period, which the lender said was partly due to the removal of the 100% guarantee on savings that the government put in place following the run on the bank in September 2007 and also due to the decision to close its Guernsey business.
Hoffman said he was not concerned about the outflow of funds. Some £400m were due to the closure of Guernsey and he said that other deposits had been at expensive rates. "We regard our retail deposits as stable," he said.
Hoffman said that Northern Rock plc was "well positioned to capitalise on future growth opportunities and is now able to compete on the same terms as other banks and building societies.
"Northern Rock is focused on providing excellent service to its customers and meeting their needs. The company continues to operate from a position of capital strength and remains committed to returning to private ownership when the time is right."
Northern Rock plc is largely funded by retail deposits while Northern Rock (Asset Management) is backed by a government loan, which reduced to £22.5bn from £22.8bn during the period, as well as wholesale funding, such as its Granite vehicle. Hoffman, who is also chief executive of the asset management business, said the results were "encouraging". He said: "The company is continuing to show improving profitability and 90% of the mortgage book remains fully performing."
Even so, the number of mortgages in arrears rose to 22,837, up from the 22,564 in arrears at the end of last year. This represents 5.64% of the mortgage book, although if the controversial Together products are excluded the arrears fall to 4.68%. Together loans allowed homeowners to borrow up to 125% of the value of their property.
Source: Northern Rock savings fall but 'bad bank' is in the black | Business | guardian.co.uk
