Bradford & Bingley rescuer returns over £6bn to the taxpayer

UKARs chief executive Ian Hares
UKARs chief executive Ian Hares
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UK Asset Resolution (UKAR), which manages Bradford & Bingley and NRAM’s closed loan books, has returned a further £6.3bn to the taxpayer.

UKAR said its mission is to maximise value for the taxpayer, whilst serving its customers well and treating all its stakeholders fairly.

This latest loan repayment brings total repayments to the taxpayer to £44.7bn since UKAR was formed. Around 92 per cent of the Government loans have now been repaid.

In interim results for the six months to September 30, UKAR said the £6.3bn loan repayment includes the remaining £4.7bn of the Financial Services Compensation Scheme (FSCS) debt.

The balance sheet was reduced by a further £6.2bn to £13.6bn bringing the total reduction to £102.2bn (88 per cent) since formation of UKAR in 2010.

Over the period, it completed the sale of £5bn B&B mortgage assets to an investor group led by Barclays Bank and agreed the sale of an £860m portfolio of equity release mortgages to Rothesay Life.

Underlying pre-tax profit fell 22 per cent over the six months to £186.4m, reflecting the reduction in mortgage balances.

Statutory pre-tax profit was £49.5m including a £295.2m profit on the sale of customer loans more than offset by the £392.1m impact of unwinding hedges relating to the equity release mortgages.

Mortgage accounts three or more months in arrears, including possessions, fell by 15 per cent since March 2018, bringing the total reduction to 92 per cent since formation.

UKAR’s chief executive Ian Hares said: “In the first half, we repaid the remaining FSCS debt and agreed the sale of a portfolio of equity release mortgages. These are major steps towards realising our objective of reducing the balance sheet while continuing to maximise value for the taxpayer.

“It is pleasing that we continue to see high levels of service delivered for our customers.”

UKAR said it has made “great progress“ in reducing the balance sheet and it is now working towards returning the remaining loan books to the private sector, if possible through a sale of the NRAM and B&B legal entities.

This would leave UKAR in public ownership, responsible for meeting outstanding contractual obligations, sponsoring the legacy defined benefit pension schemes and administering other non-loan assets and liabilities.

“As always, in taking these actions, we need to satisfy ourselves, UK Government Investments and HM Treasury that the options we choose represent value for money for the taxpayer and ensure the continued fair treatment of customers,” the firm said.

Since the firm was set up in October 2010, the balance sheet has reduced by £102.2bn, including £36.8bn of customer loan repayments and £33.0bn of loan sales, facilitating the repayment of £57.5bn of wholesale funding and £44.7bn of Government funding.

At the end of September, lending balances stood at £11.0bn, down from £17.2bn in March.

Administrative expenses for the six month period were 18 per cent lower than the equivalent period in 2017/18 at £65.2m. The reduction reflects the lower cost of administering a smaller mortgage book.

Overall, the net loss arising from the sale of the equity release mortgages incurred was £180.2m. A No Negative-Equity Guarantee (NNEG) was provided on the equity release mortgages, as is standard for these products.

UKAR said that given the performance of the housing market since the loans were originated, it estimates that the NNEG is likely to have adversely impacted the sale price by around £200m.

Reflecting heightened awareness of the August 2019 PPI deadline, payments during the period were higher than expected. The provision for PPI has risen by £44.1m.