Northern Rock 'bad bank' pays back another £1bn

The group formed from Northern Rock and Bradford & Bingley’s toxic loans has paid back another £1bn in taxpayer cash this year after ramping up its debt repayments.

The group formed from Northern Rock and Bradford & Bingley’s toxic loans has paid back another £1bn in taxpayer cash this year after ramping up its debt repayments.

Northern Rock Asset Management (NRAM) – split from the “good” part of nationalised Northern Rock in January – repaid £700m in the past three months alone after returning to profit in the first half.

Its recent repayments are more than double the £300m handed back in the six months to June 30 and comes at a welcome time as the Government scrambles to raise cash and reduce its gaping deficit.

NRAM clawed its way out of the red in the first half, with underlying pre-tax profits of £167.3m against losses of £243.9m a year earlier.

The group said this trend has continued into the second half of the year so far.

It also announced today that it has completed the merger with the nationalised arm of Bradford & Bingley.

The move sees chief executive Gary Hoffman step down to concentrate on heading the so-called good bank, with Richard Banks taking over at NRAM.

Mr Hoffman said: “Following the successful rescue and restructure of the former Northern Rock business, NRAM returned to profitability in the first half of 2010 as income increased, impairment charges were reduced and arrears continued to stabilise.

“This trend has continued in the third quarter and I feel NRAM is being handed over in good shape for the future.”

NRAM said repayments of state debt were in line with expectations, although it still owes more than £20bn.

It intends to pay back around 50% of the cash within five to 10 years, but repayment of the full amount will be a lengthy process as mortgage accounts are redeemed.

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