Nationalised B&B’s profits rise but challenges ahead

UK Asset Resolution (UKAR), which also holds the so-called “bad” part of Northern Rock (NRAM) spun off from its branches last year, said it NRAM repaid £1bn to taxpayers in the first half of the year, taking it to £2.1bn repaid within 18 months.

B&B’s charge for bad debts dropped by £117.4m to £44.1m. Statutory profit before tax for B&B in the first half was £139.3m, although way down on the £896m a year earlier, which included a £712.3m benefit from the repurchase of subordinated liabilities.

“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,” said chief executive Richard Banks.

“Arrears at NRAM are beginning to stabilise whilst arrears at B&B continue to reduce. However, we remain cautious about the future as there is continuing pressure on household finances.”

The state-backed loan books, nationalised at the height of the credit crunch, has benefited in recent months from the record low interest rates, which are allowing its borrowers to repay their loans and stay in their homes.

However, it warned the outlook for the UK economy remains uncertain. “Household incomes will continue to be impacted by increases in taxes, higher inflation and job losses, and inevitably, higher interest rates at some point,” said UKAR.

“We expect more customers to get into difficulties in the remainder of 2011 and this may result in more arrears and repossessions. In these challenging circumstances we are increasing our investment in developing more pro-active contact with customers in financial difficulty.”

NRAM reported underlying pre-tax profits of £344.1m, up from £181.8m a year earlier.

While its bad debt charge reduced by £105.7m to £171.9m in the first half, the number of mortgage accounts three months or more in arrears increased by six per cent from the year end to 27,010.

B&B still owes the taxpayer £27bn and NRAM’s loan stands at £20.7bn.