05/08/2009
Poor results expected at Northern Rock
The Financial Times reports that the mortgage lending bank Northern Rock has reported a pre-tax loss in the first six months of 2009 of GBP724m, with toxic loans representing three times as much as the total reported one year earlier (an increase from GBP191.6m to GBP602.2m). Pre-tax losses announced for the half are higher than the GBP585m announced for the first half of 2008. However, it is lower than the GBP771m losses reported for the second half of last year. New loans in 2009 are likely to total something closer to GBP4bn than to GBP5bn, the amount planned when the business was nationalised and restructured. Since April, Northern Rock has been warning that it will run a “net deficit” in 2009. The business is now waiting to learn if the European Commission will approve aid from the UK government and its plan to spin off the bank’s activities into a “good bank” and a “bad bank.” The bank is also expecting total toxic loans to increase in second half 2009, in line with increases in the first half of the year. It is predicting, however, that they will begin to decline in size in 2010. As to an eventual return of Northern Rock to the private sector, the British newspaper reports that Mr. Hoffman, the bank’s CEO, says there are currently no plans underway, nor has a calendar been agreed with the British government.
