Northern Rock Sees Rise in Arrears
Stricken Newcastle bank Northern Rock has said that the UK mortgage market remains “uncertain” and arrears have increased, but they were still making “solid progress” with their business plan.
In the bank’s quarterly report, chairman Ron Sandler said that while arrears rose, the credit quality of its loans was still “satisfactory”. Mr Sandler also stated that the nationalised bank's turnaround plan, which aims to return it back to private ownership, was progressing. He said: “We remain firmly focused on our business priorities of repaying the government debt, releasing the guarantee arrangements and, in due course, returning Northern Rock to private ownership.”
The bank is trying to transfer its mortgage customers to other lenders in order to try and reduce its balance sheet and pay off its massive loans to the Bank of England. However, the bank said that this was proving harder than they had anticipated due to the credit crunch and the recent impact this has had on the availability of mortgages. Mr Sandler explains: “This (financial) environment presents Northern Rock with challenges, especially as regards the company's ability to meet its targeted mortgage redemption levels in the future.” However, despite this setback, Mr Sandler remained positive and labelled the bank’s continued improvement as “encouraging.” He said: “Nevertheless, given this backdrop, the company's progress against its plan to date is encouraging.”
In another attempt to regain full control of their business, Northern Rock plans to offer a limited range of new mortgage products, although gross residential mortgage lending in the first quarter of the year remains a “modest” £1.2 billion. The bank will also roll out a major restructuring plan, which will involve the axing of over 2,000 jobs.
Northern Rock was forced to seek emergency funds from the Bank of England in September 2007 in order to stay afloat. It was eventually nationalised in February 2008.
Source:
BBC
Press Association