Northern Rock shows losses of £585m

3:32pm Tuesday 5th August 2008

Northern Rock unveiled losses of £585.4 million so far this year as more of its customers failed to keep up with their mortgage payments.

The nationalised lender said it suffered a bad debt hit of £191.6 million during the six months to June 30 - more than three times last year's figure - while it sustained more than £130 million in restructuring costs and fees associated with its move into public ownership.

The proportion of Northern Rock's mortgage accounts more than three months in arrears at June 30 more than doubled during the six months to 1.18%, while the number of homes in possession jumped 67% to 3,710.

But Northern Rock's chairman Ron Sandler said the business repaid £9.4 billion of Bank of England loans during the period, taking the amount owed at the end of June down to £17.5 billion.

However, he warned of more challenging conditions ahead and said the Government had agreed a £3 billion move to bolster its balance sheet. It will involve the Treasury swapping some of the outstanding debt for shares.

Mr Sandler had already warned the bank would make "substantial" losses this year.

But the Government's loan repayments were "well ahead" of target, he said, and the lender remained on track to pay them all back by the end of 2010.

Mr Sandler said: "The external environment has deteriorated and the consequences of this for Northern Rock are increased credit losses."

He added: "While the losses reported today are likely to continue as the restructuring proceeds and as the credit environment remains difficult, I am confident that the foundations have been well laid for recovery and return in due course to private ownership."

Chancellor Alistair Darling also said the bank was facing a "very difficult time" in common with other banks around the world, but was repaying its debt.

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