Bailed-out banking pair repay further £1bn after profits surge

The state-owned company that runs Northern Rock Asset Management (NRAM) and Bradford & Bingley yesterday said it had paid back a further £1 billion to the UK government.

UK Asset Resolution (UKAR) said NRAM had now returned a total of 2.1bn to taxpayers in the last 18 months, bringing its balance down to 20.7bn at the end of June.

The update came as NRAM revealed a surge in pre-tax profits in the six months to June to 344.1 million, from 181.8m last year. Bradford & Bingley reported profits of 152m from 83.6m last year.

The government split Northern Rock in two at the start of last year, forming Northern Rock Plc, which is now up for sale, and NRAM to house the more toxic loans. B&B merged with NRAM shortly after it was formed.

Northern Rock Plc reported a 232.4m pre-tax loss for 2010, but insisted it was on the road to recovery. Northern Rock was nationalised in February 2008 after it collapsed during the credit crisis, sparking the first run on a UK bank for 150 years. Bradford & Bingley was taken over by the government later that year. The group's savings business was sold to Spanish-owned Santander.

The 1bn returned to the government came from NRAM's outstanding balance - B&B still owes 27bn. This brings the combined debt to 47.7bn.

NRAM saw mortgage accounts three months or more in arrears increase by 6 per cent over the six months to June to 27,010, while B&B saw a fall of 16 per cent to 10,956.

NRAM and B&B decreased costs by 28 per cent and 10 per cent respectively, while loan impairment charges also fell at both companies.

UKAR chief executive Richard Banks said: "Our aim is to maximise value for the taxpayer and we have accelerated the repayment of government debt with a further 1bn repaid in the first half of 2011.

"Arrears at NRAM are beginning to stabilise, while arrears at B&B continue to reduce."

The group said that most of B&B's buy-to-let customers continued to benefit from a borrowing rate that was less than the rental yield. As a result, the number of customers three months or more in arrears fell from 4.1 per cent to 3.6 per cent, including possessions.

It added: "In seeking to support customers through periods of financial difficulties we actively work with debt advisory services to help customers reorganise their finances and ensure, wherever possible, that they can continue as homeowners."