UK Asset Resolution, which manages bailed out lenders Bradford & Bingley and Northern Rock’s “bad bank”, repaid £4bn to taxpayers in 2012 but had to set aside £401m for customer redress over missold payment protection insurance and issues with customers’ loans paperwork.
UKAR’s full year results for 2012 show the company repaid £4bn to taxpayers in 2012, up 43 per cent from the £2.8bn it repaid in 2011.
Underlying pre-tax profit rose from £1.089bn to £1.097bn, but was hit by increased interest rate payments on Government loans.
Statutory pre-tax profit fell from £1.4bn to £690.5m due to UKAR buying back debt securities in 2011, and the £401m it has set aside this year for customer redress.
PPI misselling by Northern Rock has so far cost UKAR a total of £368m. UKAR has contacted around 150,000 customers who were sold PPI from 2005 onwards and compensated customers where they were missold. It says it has also uncovered 40 other “remediation issues” relating to the old Northern Rock mortgage book, with some customers receiving compensation as a result.
UKAR has also had to recalculate loans taken out by Northern Rock customers by £159m after mistakes were found in the documents and statements the banks sent to customers. The errors were identified when UKAR took full control of the Northern Rock mortgage book, known as Northern Rock Asset Management, when the systems were transferred from Northern Rock in 2012.
Adjusting customers’ balances to reflect the mistakes will cost NRAM around £271m in total.
Northern Rock was split in two in 2010, with the so-called “bad bank” Northern Rock Asset Management going to UKAR and holding residential mortgages, unsecured loans, and the Government loan; and Northern Rock plc which holds deposits and offers new mortgage lending. Virgin Money bought Northern Rock for £747m in November 2011.