Northern Rock losses shrink to £257m

Distressed bank Northern Rock recorded a statutory loss of £257m in 2009, compared to a loss of £1.4bn the previous year.

The bank, which was split in two on 1 January 2010, lent £4.2bn in 2009 with an average LTV of 56%.

The bank also made a pledge to offer up to £14bn of new mortgage lending in 2009/10, which it said it is on target to meet.

The number of properties in possession fell to 2,061 compared with 3,620 in December 2008.

Mortgage accounts in arrears by over three months, including the 125% LTV Together loans, was at 4.28% at December 2009, up from 2.92% in December 2008 and higher than the industry average of 2.38%. However, excluding Together mortgages, the three-months arrears rate fell to 3.10%.

In the second half of 2009, a statutory profit before tax of £467m was recorded compared to a loss before tax of £724m in the first half of 2009. The improved performance in the last six months of the year was attributed to improved net interest income and a reduced loan impairment charge. The bank expects loan loss impairment charges to have peaked in 2009.

Gary Hoffman, chief executive of Northern Rock, has waived his 2009 bonus but is in line for a long-term incentive if Northern Rock return to profitable privatisation, said the £257m loss was far better than expected.

He adds: "It is over two years since Northern Rock entered public ownership. During that time the company has made good progress in pursuit of its objectives that include repayment of state aid, delivering value for taxpayers and ultimately a return to private ownership."

In January 2010, Northern Rock completed a legal and capital restructure following approval by the European Commission in October 2009.

It was divided into Northern Rock Asset Management, which does not hold retail deposits and does not offer any new mortgage lending, and Northern Rock plc, which holds approximately £50bn of residential mortgages and unsecured loans of £3.9bn.

Following the legal and capital restructure, the Government loan increased by £8.5bn to 322.5bn.

The Government hopes to sell Northern Rock plc and Santander, Virgin Money and Tesco have all been named as potential buyers.