This article is from the source 'bbc' and was first published or seen on . It will not be checked again for changes.
You can find the current article at its original source at http://news.bbc.co.uk/go/rss/-/1/hi/business/7321995.stm
The article has changed 7 times. There is an RSS feed of changes available.
Version 3 | Version 4 |
---|---|
Rock pledges to repay taxpayers | Rock pledges to repay taxpayers |
(30 minutes later) | |
Newly-nationalised bank Northern Rock has promised to repay its £24bn state loan by 2010 despite warning that it would not break even for three years. | Newly-nationalised bank Northern Rock has promised to repay its £24bn state loan by 2010 despite warning that it would not break even for three years. |
The bank added that it would be "significantly loss making" in 2008, after a 2007 pre-tax loss of £167.6m. | |
Northern Rock also revealed that it would pay former chief executive Adam Applegarth a total of £785,000 as part of his severance agreement. | |
Shareholders have criticised the payout after the bank ran into problems. | Shareholders have criticised the payout after the bank ran into problems. |
Staff cuts | Staff cuts |
Northern Rock had to be rescued by the Bank of England in September 2007 after coming close to insolvency. | Northern Rock had to be rescued by the Bank of England in September 2007 after coming close to insolvency. |
BBC business editor Robert Peston said any severance payments to Mr Applegarth were always likely to provoke controversy. | BBC business editor Robert Peston said any severance payments to Mr Applegarth were always likely to provoke controversy. |
However, he added that the £760,000 payment, plus £25,000 in non-cash and other benefits, that Mr Applegarth will receive is less than his contractual entitlement. | |
It's by no means all bad news Robert Peston,BBC business editor Read Robert's thoughts in full | |
One contributor to the bank's loss was just under £50m of payments to City firms and professional advisers, incurred by it and the government when it was struggling to avoid nationalisation. | One contributor to the bank's loss was just under £50m of payments to City firms and professional advisers, incurred by it and the government when it was struggling to avoid nationalisation. |
As it tries to get back on its feet, Northern Rock said it would cut costs by 20%, and trim staff numbers by a third over the next three years. | As it tries to get back on its feet, Northern Rock said it would cut costs by 20%, and trim staff numbers by a third over the next three years. |
It also wants to have a smaller business and plans to reduce its balance sheet to close to £50bn from about £107bn in 2007. | |
The BBC's Robert Peston said that while the bank's earnings figures looked worrying, "it's by no means all bad news". | |
"Ignoring the exceptionals, write downs and one-off charges, pre-tax profit emerges at about £420m for the year, sharply down on the £590m made in 2006, but indicative of a business with a future", he said. | |
Wider problems | Wider problems |
Northern Rock ran into trouble after problems in the US housing market prompted a global credit crunch. | Northern Rock ran into trouble after problems in the US housing market prompted a global credit crunch. |
Faced with deteriorating market conditions, many banks stopped lending to each other and Northern Rock's main source of financing dried up. | Faced with deteriorating market conditions, many banks stopped lending to each other and Northern Rock's main source of financing dried up. |
As a result, it was forced to approach the Bank of England for emergency funding, which prompted a run on the lender, the first on a UK bank in more than 100 years. | As a result, it was forced to approach the Bank of England for emergency funding, which prompted a run on the lender, the first on a UK bank in more than 100 years. |
Critics have blamed the bank's former management, and in particular Mr Applegarth, for borrowing too much money from the financial markets to fund Northern Rock's business. | Critics have blamed the bank's former management, and in particular Mr Applegarth, for borrowing too much money from the financial markets to fund Northern Rock's business. |
They have complained that the bank's aggressive lending policy and a failure of oversight from market regulators led to the nationalisation of Northern Rock and a slump in the value of their investments. | They have complained that the bank's aggressive lending policy and a failure of oversight from market regulators led to the nationalisation of Northern Rock and a slump in the value of their investments. |
Northern Rock's business model meant that it borrowed money to fund about 60% of its total lending, with savers' assets making up the rest of the money. | |
That level of funding from the financial markets was almost double that of many of its rivals, who relied more heavily on money provided by savers. |