'Bad banks' Northern Rock and Bradford and Bingley cough up £4b in loans

Only another £34.6b to go before the taxpayer sees a profit

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The bad bank parts of Bradford & Bingley and Northern Rock paid back another £3.7bn of taxpayer loans in the last year, taking the total returned since their state owner, UK Asset Resolution (UKAR), was set up in 2010, to £14.1bn.

But there is still a further £34.6bn of Government loans to go before the Chancellor, George Osborne, will start to see any profit on this particular part of the financial crisis bank bailouts.

Richard Banks, the UKAR chief executive, is confident that the loan repayments will speed up after it put a massive £13bn book of Northern Rock mortgages and its mortgage servicing business up for sale in April. The loan book is five times the size of all the mortgage portfolios sold by UKAR in 2014.

Mr Banks said that there had been strong interest shown for both assets, but declined to confirm that the Royal Bank of Scotland is among bidders for the mortgage book – in what would be its first acquisition since its own £45bn bailout.

Mr Banks said: “We have completed the first stage of the sales processes with indicative offers and are pleased with the level of interest in both assets.

"The second stage, which will see a smaller number of bidders putting forward much more detailed proposals, will start towards the end of July."

That would indicate a final deal early in 2016 rather than before the end of this year, he added.

Mr Banks is still confident that once UKAR is completely wound up – and some of its mortgages run until 2049 – that “there will be a surplus for the taxpayer”. But he is not sticking his neck out by saying just how much that surplus might be.

In the meantime, the improving housing market has made life easier for its 389,000 customers. That figure is down from 467,000 last year as more people paid off or transferred mortgages which have run their term.

The size of the balance sheet has likewise shrunk by another £8.8bn last year, with total loans and mortgages now standing at £52.7bn. That is a £49.7bn, or 43 per cent, reduction since 2010.

Given that the original B&B and Northern Rock mortgage books UKAR inherited were particularly troublesome, it is notable that arrears came down by 23 per cent to 11,976. That is a 73 per cent reduction since 2010. Repossessions fell from just over 5,000 to 2,856.

UKAR also set aside £268m to compensate customers who, under Northern Rock, took out loans for more than £25,000 and were sent the wrong documentation under the Consumer Credit Act. The former building society has taken the case to the Court of Appeal and is awaiting a result.