UKAR pays off Government loan

UKAR chief executive Ian HaresUKAR chief executive Ian Hares
UKAR chief executive Ian Hares
The “bad bank” set up to manage more than £100bn of assets from failed lenders Bradford & Bingley and Northern Rock has repaid the last of the £48.7bn loan used to fund the bailouts.

Both lenders collapsed during the financial crisis a decade ago. UK Asset Resolution (UKAR), which is owned by the Treasury, said it had fully ended the loan, several years earlier than had been expected.

When asked how UKAR has managed to pay off the Government loan early, chief executive Ian Hares said: “It was due to a lot of hard work, supportive markets and demand for the assets.”

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Having paid off the loans, UKAR still has £5.5bn of mortgages and the plan is to sell these on to other lenders with the process due to be completed in 2020.

“We expect that all customers would have gone back into the private sector during 2020,” said Mr Hares.

“A small shell we be left behind which we plan to outsource. Our mandate is very clear, which is to end this period of temporary public ownership.”

In the year to March 31, UKAR reduced its balance sheet by £8.4bn to £11.4bn following the sale of four asset portfolios.

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In line with reducing mortgage balances, underlying pre-tax profit fell 42 per cent to £340.1m.

The total number of customers fell by 96,000 to 35,000 with lending balances down to £5.5bn and UKAR said that more than 92 per cent of these are loans performing well.

Mortgage accounts three or more months in arrears, including possessions, fell by 14 per cent. UKAR said the reduction was a direct consequence of proactive arrears management coupled with the low interest rate environment.

It said that whilst it will continue to work hard to help customers who fall into arrears, in the light of the progress made over the last few years and if interest rates rise, it expects the rate of decline in our arrears may slow in the year ahead.

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The firm has attempted to contact all customers following a missed payment to understand their situation and consider solutions to help them manage their mortgage.

Where appropriate, it has encouraged customers to seek help from non-fee charging debt advice agencies. It said that repossession is always viewed as a last resort, but unfortunately in some situations it is inevitable and the best course of action to prevent further indebtedness for the customer.

Repossessions continued to fall and totalled 931 in the year, down from 1,004 the previous year.

Mr Hares said: “Whenever a customer falls into arrears, we will contact them and try to understand their problems and see if there is anything we can do anything about it. We’ve run campaigns for customers to see if they can get a better deal.”

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The repayment marks one of the last milestones in the Government’s intervention during the financial crisis, with only its stake in Royal Bank of Scotland remaining. The taxpayer is set to take an overall loss on its rescue of banks during that period, mostly due to the slump in RBS’s value.

UKAR, a state-run loan firm that does not take on new business, said it has increased provisions for mis-selling of payment protection insurance (PPI) by £64m, as payments during the year had been higher than expected.

Between UKAR’s creation in 2010 and March 31 this year, its balance sheet shrank by £104.4bn, including £43.5bn of customer loan repayments and £37.4bn of asset sales.