The section of Northern Rock that deals with the toxic mortgages and loans that led to its nationalisation in 2008 has shown a profit. The so-called “bad bank” department, known as Northern Rock Asset Management, reported a pre-tax profit of £349.7 million, according to its half year results.
Low interest rates have meant that 90 per cent of borrowers have been able to meet their mortgage repayments, benefiting the financially marred institution.
The “good bank” section, which controls the deposits of savers made a loss of £142.6 million.
The bank was split into two last year with 80 per cent of risky assets transferred to the asset management arm of the firm and £10 billion of viable mortgages placed in the “good bank” division called Northern Rock Plc.
In May of this year the government removed its 100 per cent guarantee on savings with the bank after it showed significant improvement in its monetary dealings.
Gary Hoffman, Northern Rock plc Chief Executive, said:“Following the successful legal and capital restructure of the former business, Northern Rock plc has made solid progress. The business is stable, well capitalised and a safe home for retail deposits – factors which allowed us to successfully release the Government retail savings guarantee well ahead of the original plan”.
He added: “The financial performance of Northern Rock plc is in line with our expectations. However, conditions remain challenging across the sector. The mortgage market remains relatively subdued, with low interest rates having an adverse effect on banks which are mainly funded by retail deposits”.
The bank hopes to eventually return to the private sector in the future if improvement continues despite its £22.5 billion debt to taxpayers. A run on its branches caused the bank to collapse in September 2007 after customers became aware that the firm had asked for financial assistance from the Bank of England.