Bradford & Bingley and Northern Rock return to profit
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UK Asset Resolution, the government owned company that runs Northern Rock Asset Management and Bradford & Bingley has revealed that both companies returned to profit in 2010.
Northern Rock Asset management, the so-called bad part of Northern Rock made an underlying profit before tax of £277.4m, compared with a £313.4m loss in 2009 and a statutory profit of £400.5m, compared with £257.5m loss in 2009.
Earlier this month, Northern Rock plc, the so-called good bank which was formed when the bank separated revealed a £232.4m pre-tax loss for 2010.
Bradford & Bingley made underlying profits of £200.1m in 2010, compared with losses of £166.5m in 2009.
Both companies continued to benefit from the support of the government in the form of lower interest rate loans. NRAM repaid £1.1bn of its loan to reduce the balance to £21.7bn during the year. B&B government funding of £27.0bn has remained stable, and no further drawings were made in 2010.
B&B received £2.1bn in redemption payments and NRAM £4.3bn.
The lenders say redemptions are lower compared to the previous year due to the reduced book size in both organisations and the challenge faced by many customers to find suitable remortgage opportunities with other lenders due to the continuing difficult market conditions.
The number of arrears at B&B has fallen in 2010. Arrears at NRAM have continued to increase but at a slower rate than in 2009. As at the end of 2010 there were 13,096 cases of B&B mortgages in arrears for three or more months including possessions, a fall of 32% compared to the end of 2009.
For NRAM, the equivalent figure was 25,419, up by 3%, a reduced rate of increase compared to the 18% year-on-year rise experienced in 2009.
During 2010 B&B says it made good progress in respect of customers with serious arrears, reflecting tight management of collection activity. Most buy-to-let customers also benefited from a borrowing rate that is less than the rental yield, the result being that the number of customers more than three months in arrears fell from 5.5% to 4.1%, which includes possessions.
NRAM arrears rose from 4.7% to 6.6% resulting from the transfer of £10.3bn mortgages to Northern Rock plc on 1 January 2010, the declining total book and the nature of the mortgages in the book which have high loan-to-value ratios and do not benefit from the lower interest rates applicable to the majority of B&B buy-to-let customers.
Richard Banks, chief executive of UKAR, says: “We achieved all our business objectives in 2010. B&B and NRAM moved from loss to profit and we continue to focus on managing customer arrears. We will continue to help customers alleviate short term issues and also work with customers with more fundamental problems to enable them to exit the housing market in an orderly way.
“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.”
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