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August 4, 2009    

Northern Rock posts first half loss

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by Kay Murchie

Nationalised lender Northern Rock has today reported a pre-tax loss of £724.2 million for the first half of the year, compared with a loss of £585.4 million in the same period a year ago.

Northern Rock collapsed at the onset of the credit crunch in autumn 2007 after savers staged a nationwide run on the bank.

The problems meant it had to seek emergency funding and received £26.9 billion from the Bank of England.

The bank, which was nationalised in February 2008, now owns the Government £10.9 billion.

However, it was recently reported that the Government is keen to offload Northern Rock this autumn with a plan of sale that involves the lender being split into two: one good and one bad bank.

In the meantime, the lender said mortgages that have fallen into arrears by more than three months grew to 3.92% in the second quarter of the year - exceeding the national average of 2.39%, according to figures from the Council of Mortgage Lenders.

Furthermore, 6.4% of its Together mortgages (the 125% LTV product which has since been withdrawn) are more than three months in arrears, up from 2.14% this time last year.

Chief executive, Gary Hoffman, comments: “The current environment continues to be challenging, however, against this backdrop Northern Rock is making progress against its revised plan and has delivered results in line with expectations.”

“We anticipate receiving state aid approval in the autumn and legal and capital restructuring of the company to be completed by the end of the year. This ultimately prepares for a return to the private sector,” he added.

In stark contrast, Northern Rock’s results come just a day after Barclays announced pre-tax profits of £2.98 billion for the first six months of the year - up 8% compared with the same period a year earlier.

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