November 5, 2009

Northern Rock makes good progress ahead of split

by Gill Montia

Story link: Northern Rock makes good progress ahead of split

Northern Rock has announced that its performance has improved “against a challenging economic background”.

In an update on the third quarter of the year, the nationalised lender said it continues to make good progress in implementing its new business plan and the proposed split into one good and one bad bank.

In addition, the company’s overall financial performance in the second half of 2009 is expected to show “significant improvement” on the first half of the year.

Gross mortgage lending during the three months to the end of September increased to £1 billion, raising the total for the first nine month of 2009 to £2.3 billion.

According to the bank, the quality of new lending remained high, with the average loan-to-value ratio of new lending at 55%.

Mortgage arrears saw a slowdown in the rate of increase during the third quarter, although residential arrears rose to 4.11%, compared to 3.92% at the end of June.

The lender’s stock of unsold repossessed properties has halved, from a peak of 4,201 at September 2008, to 2,193 at the end of September.

Following its restructure, the group intends to further increase gross mortgage lending in 2010 towards its £9 billion target.

Savings balances as at 30 September stood at £19.0 billion, up from £18.4 billion at the end of June.

The Government’s 100% guarantee of Northern Rock’s retail savings remains in place but will be reviewed as the group completes its split.

However, a minimum three-month notice period of change will be given to savers and fixed-rate bonds will retain their 100% guarantees for their full terms.

The group’s gross debt to the Government stood at £14.5 billion at the end of September, unchanged from June.

Chief executive, Gary Hoffman comments: “I am encouraged by the improving financial performance of the company … we are continuing to make good progress.”