Nationalised mortgage lender Northern Rock said on Wednesday that it returned to profit in the second half of 2009 as interest income rose and losses on loans fell.
Northern Rock said it posted a profit of 466.7 million pounds ($696 million) in the second half, following a loss of 724.2 million in the first half of 2009.
For the full year, Northern Rock reported a pre-tax loss of 257.5 million pounds ($384 million), down from a loss of 1.355 billion pounds in the previous year.
Loan loss impairments rose to 1.05 billion pounds from 894 million pounds in 2008.
“Loan loss impairment charges are expected to remain high during 2010, relative to historic norms, but below the level recorded in 2009,” the company said.
The results were the last for the old company, which on January 1 was split into two units.
Northern Rock PLC, which expects to return to profit, holds 10 billion pounds in mortgages, 5 billion pounds cash, 5 billion pounds of the government loan to Northern Rock and 19 billion pounds in retail deposits.
The second unit, Northern Rock (Asset Management) PLC, holds 80 billion pounds of Northern Rock’s riskiest assets, the rest of the residential mortgage book, the bulk of the existing government loan to Northern Rock plus the bank’s wholesale funding instruments. It will not accept deposits and will not issue new mortgage loans.
During 2009, Northern Rock increased gross residential lending to 4.2 billion pounds, up from 2.9 billion pounds in 2008.
Northern Rock said it would pay 13.4 million pounds to managers who met their targets, plus 1.5 million pounds in extra taxes on bonuses, but Chief Executive Gary Hoffman, waived his entitlement for the year.
Northern Rock, once the country’s fifth biggest lender, suffered the first run on a British bank since 1866 after the Bank of England announced in September 2007 that it had provided emergency funding.
The government pumped 27 billion pounds in loans and assumed contingent liabilities of 29 billion pounds in an effort to keep Northern Rock afloat, before resorting to nationalization on Feb. 22, 2008.
The government guaranteed 100 percent of customers’ deposits in Northern Rock, and that guarantee remains in place.
As of October, Northern Rock accounted for 5.5 percent of the mortgage market, compared to 7.5 percent at the end of 2007; and it held 1.5 percent of U.K. savings deposits.
Since Northern Rock was taken over, the government also took control of mortgage lender Bradford & Bingley, an 84 percent stake in Royal Bank of Scotland and a 43 percent stake in Lloyds Banking Group.