UKAR anounces profits for nationalised banks

Click to follow

The state-owned company that runs nationalised Northern Rock Asset Management and Bradford & Bingley today said both companies returned to profit last year.

UK Asset Resolution said Northern Rock Asset management - spun-off from the so-called "good" part of nationalised Northern Rock last year - made underlying profits of £277.4 million in 2010, compared with a £313.4 million loss the year before.

Bradford & Bingley made underlying profits of £200.1 million in 2010, compared with losses of £166.5 million in 2009.

The Government split Northern Rock in two at the start of last year, forming a mortgage and savings bank called Northern Rock plc and Northern Rock Asset Management (NRAM) to house the more toxic loans, which was later merged with B&B.

Northern Rock plc said it remained in the red earlier this month, reporting a £232.4 million pre-tax loss for 2010.

Both banks returned to profit as they saw a marked reduction in losses on loans turned sour.

UKAR said the 850,000 customers within both banks benefited from rock-bottom interest rates as the Bank of England's base rate stayed at a record low of 0.5% throughout the year.

This led to an improvement in the number of borrowers struggling with repayments.

NRAM saw the number of mortgages falling into arrears for three months or more increased 3% to 25,419 in 2010.

But the rate of increases was at a lower level than in the previous year when there was an 18% rise, it said.

B&B said the number of mortgages in arrears fell 32% to 13,096.

Both companies were also helped by low borrowing costs on its loans from the Government.

However, UKAR warned that inflation, Government cuts, job losses and a possible rise in interest rates would put pressure on disposable incomes this year and could impact on bad debt levels.

Richard Banks, chief executive at UKAR, said: "B&B and NRAM moved from loss to profit and we continue to focus on managing customer arrears.

"The combined business is now better placed to move forward in 2011.

"However, the uncertain economic environment, increases in taxes, inflation and unemployment will, inevitably, impact our customers and our financial results."

Northern Rock was nationalised in February 2008 after it collapsed amid the credit crisis, sparking the first run on a UK bank for 150 years.

Bradford & Bingley was taken over by the Government later that year, while the group's savings business was sold to Spanish-owned Santander.

The banks still owe a total of £48.1 billion to the Government.

NRAM said it had repaid £1.1 billion of its loan to Government over the year to reduce its balance to £21.7 billion, while B&B's loans from the Government remained unchanged at £27 billion at the end of the year.