Northern Rock, the first UK lender taken over by government during the credit crunch, has reported that first half (H1) 2009 loss has increased by 30%, as delays in payments on mortgages surged.
The Newcastle, UK-based bank recorded a reduced underlying loss of £269.6 million in the first half of 2009, including a loan loss impairment charge of £602.2 million. This compares with an underlying loss in H1 of 2008 of £443.3 million, and £849.7 million in H2 of 2008.
The main drivers of the reduced underlying loss were: improved underlying net interest income (reflecting the lower interest rate environment), a reduced impairment charge for Treasury assets, and a reduction in exceptional costs incurred.
The company’s statutory loss before tax was £724.2 million. Gross residential mortgage lending in the first half of the year amounted to £1.3 billion. Retail funding balances at 30 June 2009 were £18.4 billion, as compared to £19.6 billion at 31 December 2008. The reduction in balances reflects lower retail funding inflows as a result of increased competition in the retail savings market, along with a more normalised customer view of the savings market and Northern Rock’s place within the market.
Provisions for bad loans exceeded £1 billion in the first half. Gary Hoffman, CEO of Northern Rock, commented: The current environment continues to be challenging, however, against this backdrop Northern Rock is making progress against its revised plan and has delivered results in line with expectations. We anticipate receiving State aid approval in the autumn and the legal and capital restructuring of the Company to be completed by the end of the year. This ultimately prepares for a return to the private sector.
