Leadership

Northern Rock narrows losses in 2009

10.03.2010
Nationalised UK lender Northern Rock has narrowed its annual pre-tax losses to £383.3m in 2009, compared to losses of £1.29bn reported in 2008.

The lender said this loss narrowing was achieved despite it having to absorb a loan loss impairment charge of £1.04bn for 2009, which was up from 2008’s charge of £894.4m.

Northern Rock also said it recorded a statutory profit of £466.7m for the second half of 2009, compared to a statutory loss of £724.2m during the same period a year previous.

Northern Rock was split into a good (Northern Rock (Asset Management) and bad (Northern Rock plc) bank in January, following approval of its restructuring plan by the European Commission.

“The company’s financial performance improved through 2009 on both an underlying and statutory basis,” said CEO Gary Hoffman.

Future performance dependent on interest rates
In terms of 2010, Northern Rock said the outlook for the UK economy remains uncertain.

“After a contraction in the economy during 2009, with increases in unemployment and house price deflation, conditions appear to have stabilised, but economic recovery is still expected to be relatively weak,” the lender said.

Northern Rock also said that the company’s future performance is likely to be influenced by the timing and extent of interest-rate increases, noting that the current low level of the Bank of England’s base rate means that loan repayments remain affordable for those in employment.

The bank’s mortgage arrears rate rose in the first half of 2009 before stabilising in the final quarter of the year.

Residential mortgage accounts over three months in arrears stood at 4.28pc as of the end of 2009, Northern Rock said.

CEO waives bonus
The bank also said that it was paying its staff £14.9m in bonuses, which includes a payment of £1.5m for the UK bank payroll tax.

However, CEO Gary Hoffman waived his 2009 bonus. Northern Rock said a long-term incentive scheme is being designed for Hoffman that will be aligned with the bank’s performance objectives. This will cover his tenure as Chief Executive and will only pay out upon a return to profitability, or upon the return of Northern Rock plc to private ownership.