Northern Rock, the beleaguered bank nationalised in February, has announced bigger-than-expected losses of £585m for the first six months of the year. The scale of the losses has led analyst Ralph Silva of Tower Group to claim that the Northern Rock brand is “not sustainable”.
Much of the loss came from the charges it takes to cover losses from mortgage borrowers, but it also managed to repay £9.4bn of a loan from the Bank of England. It now owes £17.5bn.
The Government has now pledged to inject £3bn to help its finances. Speaking today (August 5) on BBC Breakfast Silva said that the government should consider splitting Northern Rock and paying for rival financial institutions to take on its commitments. “Northern Rock is not a sustainable brand as an ongoing entity,” he said.
Northern Rock says that the total percentage of its residential mortgage customers in arrears and being repossessed has risen sharply to 1.18% from 0.38% in June last year.
The number of house repossessions has also risen from 2,215 to 3,710 – an increase of 67%, which represents 0.56% of all mortgage accounts.
The bank was once Britain’s fifth-biggest home loan provider, but was hit hard by the sub-prime loan crisis in America. It was nationalised six months ago after the first run on a British bank in more than a century.