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Northern Rock reports reduced losses in first half | Northern Rock reports reduced losses in first half |
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Nationalised lender Northern Rock PLC has announced reduced losses for the first six months of the year. | Nationalised lender Northern Rock PLC has announced reduced losses for the first six months of the year. |
The bank reported a pre-tax loss of £68.5m in the six months to 30 June, compared with a loss of £142.6m the previous year. | The bank reported a pre-tax loss of £68.5m in the six months to 30 June, compared with a loss of £142.6m the previous year. |
Northern Rock PLC was created last year after the lender was split in two as a precursor to a sale. | Northern Rock PLC was created last year after the lender was split in two as a precursor to a sale. |
The deadline for bids ended last week, with Virgin and JC Flowers reportedly interested. | The deadline for bids ended last week, with Virgin and JC Flowers reportedly interested. |
There have been no reported bids from building societies. At least two, Coventry and Yorkshire, have ruled themselves out of the bidding. | There have been no reported bids from building societies. At least two, Coventry and Yorkshire, have ruled themselves out of the bidding. |
The second part of Northern Rock - Northern Rock Asset Management - holds the bank's more risky loans, some of which might not be paid back. It is not due to be sold. | The second part of Northern Rock - Northern Rock Asset Management - holds the bank's more risky loans, some of which might not be paid back. It is not due to be sold. |
Sale options | |
Northern Rock PLC said it expected to return to profit in 2012 and hoped to return to private ownership shortly. | Northern Rock PLC said it expected to return to profit in 2012 and hoped to return to private ownership shortly. |
The bank, currently owned by UK Financial Investments, did not announce a precise timetable for the sale process. | The bank, currently owned by UK Financial Investments, did not announce a precise timetable for the sale process. |
"We are pleased with the level of interest we have received and will continue to explore the sale option over the coming months," said the bank's financial statement. | "We are pleased with the level of interest we have received and will continue to explore the sale option over the coming months," said the bank's financial statement. |
Job losses | |
The bank has struggled to make a profit because of low interest rates and its relatively small remaining loan book. | |
It said the reduced losses were the result of a rise in income from interest on loans - especially mortgages - and lower costs. | |
The bank also made a one off loss of £10.3m on financial positions - or hedges - taken to limit the impact of changes in financial markets. | |
This meant the bank reported an underlying loss of £78.8m. | |
In March, the bank announced 680 job losses as part of its drive to reduce costs. | In March, the bank announced 680 job losses as part of its drive to reduce costs. |
In its statement, it said approximately half the employees had now left, with the remainder to leave during the second half of the year. | In its statement, it said approximately half the employees had now left, with the remainder to leave during the second half of the year. |
'Challenging' trading | |
Gross lending in the first part of the year was £1.5bn in the six months to 30 June 2011, compared with £2bn the previous year. | |
The bank said the retail environment remained tough and competitive - especially while bank interest rates remained low, limiting potential profits on loans. | |
"The trading environment remains challenging and there is strong competition in the savings and mortgage markets," said Ron Sandler, chairman of Northern Rock. | |
The bank recently unveiled a 90% loan-to-value mortgage product in an effort to gain business from first-time buyers. |