UK 'bad bank' repays $3.4bn to govt
London, March 3, 2012
The British 'bad bank' running down the loans of bailed-out lender Northern Rock repaid £2.1 billion ($3.4 billion) to the government last year after its annual profits more than doubled as fewer home-owners had trouble with repayments.
UK Asset Resolution (UKAR) is effectively a 'zombie bank' that doesn't take new business and runs down the loans held by Northern Rock and Bradford & Bingley which had to be rescued when they ran into trouble in the credit crisis.
UKAR still owes the government £46.6 billion, down from 49.7 billion when it was formed in October 2010.
UKAR chief executive Richard Banks said he expects to repay the majority of the remaining government loan over the next decade, with repayments accelerating as home loans are repaid.
UKAR made an underlying profit of £1.1 billion last year, up from 444 million in 2010, after a fall in losses on bad debts.
Banks said arrears were likely to rise this year, even though low interest rates should prevent a major problem for customers.
'We think interest rates are going to remain at the low level for the next 12 months, but there are still pressures on disposable income, which is going to make life hard for some of our customers,' he said. 'We expect more customers to experience difficulties during 2012.'
UKAR has 657,000 mortgage customers - down from 726,000 a year earlier - and properties more than three months in arrears fell by 14 per cent to 33,216 at the end of December.
Banks said he was willing to sell portfolios of loans to accelerate the pace it repays the government, but interest from private equity firms and hedge funds had not been at attractive prices.
'We are always open to enquiries. Unfortunately people that do knock on the door want a bargain so they don't want to pay top dollar for performing assets,' Banks said.
'There's no reason why the government or ourselves would want to sell assets at below value. We can get more value out of the book than by selling it so someone else,' he said.
UKAR said it also paid £688m to the government last year in interest, fees and corporation tax.
Britain should ultimately make a profit of £9-11 billion on its bailout of Northern Rock, but may have to wait another 15 years to get all the cash, the body that manages Britain's bank stakes said.
Northern Rock was fully nationalised in 2008 after nearly collapsing during the credit crisis. Britain sold the core Northern Rock banking business to Virgin Money last year for between £747m and £1 billion.