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Tuesday 07th of October 2008
March 31, 2008

Northern Rock to reveal huge write-downs


by Kay Murchie
”Northern

Crisis-torn Northern Rock is set to reveal huge write-downs when it announces its 2007 results later today, months later than originally planned.

Interest payments to the Bank of England and provisions against its mortgage book wiped out its profits last year.

Back in September, Northern Rock said it was on target to make profits of over £500 million but increasing charges have pushed it into the red.

Furthermore, bad-debt charges against the bank’s loan book are also expected to increase as British homeowners fall further behind with mortgage repayments.

It is believed that Ron Sandler, the bank’s chairman, is keen to write off as much as possible with his first set of results.

Mr Sandler will also use the results to reveal further details on how he plans to run the bank without contravening European state-aid rules.

He has already announced it will shrink its residential mortgage lending by half and is to shed 2,000 jobs.

It has also been revealed that Northern Rock has withdrawn from its Danish business where it has also faced strong criticism from domestic rivals.

Last week, the Financial Services Authority revealed a catalogue of errors and oversights in the months leading up to the crisis at Northern Rock.

Furthermore, Jon Wood, the fund-manager behind SRM Global with a 12% stake in Northern Rock, is working on a civil action that will be raised through the European legal system. SRM, together with RAB Capital, the bank’s two largest shareholders, face combined losses of approximately £170 million following the nationalisation.

After rejecting takeover bids from the board of Northern Rock and a consortium led by Sir Richard Branson’s Virgin Group, the Government rushed through legislation to nationalise the bank last month.

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