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Northern Rock makes a £585m loss

Tue Aug 05 06:51:58 UTC 2008

Northern Rock makes a £585m loss

Tue Aug 05 07:02:01 UTC 2008

Northern Rock has announced bigger-than-expected losses of £585.4m for the first six months of the year.

Northern Rock has announced bigger-than-expected losses of £585.4m for the first six months of the year.

Much of the loss came from the charges it takes to cover losses from struggling mortgage borrowers.Much of the loss came from the charges it takes to cover losses from struggling mortgage borrowers.
But Northern Rock also paid back £9.4bn of a loan from the Bank of England, reducing the amount owed to £17.5bn.But it also managed to repay £9.4bn of a loan from the Bank of England, reducing the amount owed to £17.5bn.
The government nationalised Northern Rock in February this year following the first run on a British bank in more than a century.The government, which nationalised the lender in February after the first run on a UK bank in more than a century, will inject £3bn to help its finances.
Northern Rock also revealed that the total percentage of its residential mortgage customers in arrears had risen sharply from last year.Northern Rock revealed that the total percentage of its residential mortgage customers in arrears had risen sharply from last year.
In June 2007 the figure stood at 0.38% of mortgages, but it has now risen to 1.18%.In June 2007 the figure stood at 0.38% of mortgages, but it has now risen to 1.18%.
It also announced the government was injecting £3bn of new equity capital into Northern Rock.The money for the £3bn cash injection will come by pausing repayments of the giant taxpayer loan made to the bank, and about £3bn of that will be converted into equity.
The money will come by pausing repayments of the giant taxpayer loan made to the bank, and about £3bn of that will be converted into equity.
"Or to put it another way, the nationalised bank is having a mega rights issue that taps its one shareholder," BBC business editor Robert Peston said."Or to put it another way, the nationalised bank is having a mega rights issue that taps its one shareholder," BBC business editor Robert Peston said.
Northern Rock was hit hard by the global credit crunch, and its major form of providing mortgage loans - from the wholesale markets - dried up.Northern Rock was hit hard by the global credit crunch, and its major form of providing mortgage loans - from the wholesale markets - dried up.
The bank, once Britain's fifth-biggest home loan provider, was taken into public ownership after it failed to find a suitable buyer from the private sector.The bank, once Britain's fifth-biggest home loan provider, was taken into public ownership after it failed to find a suitable buyer from the private sector.