Northern Rock Activity Picks Up in 3rd Quarter

A report suggesting that Northern Rock’s business picked up followed formal government’s order to split the bank in two parts and sell its “good” assets. Bank’s management claimed that the restructuring proposed by the government is on the way and will be completed by the end of this year. Let us remind that Northern Rock, as well as Lloyds Banking Group, and Royal Bank of Scotland, was ordered to sell its “good” assets, such as low-risk mortgages and deposits, into the private sector; the move aims to create 3 new competitive banks in the United Kingdom. According to the statement made by Northern Rock, bank’s mortgage lending as well as arrears saw significant improvements in the third quarter of 2009. Mr. Gary Hoffman, Northern Rock’s chief executive, reported that the pace, at which bank’s arrears grow, slowed down in the second half of 2009. In Mr. Hoffman’s opinion, the bank will still make a loss in 2009, despite the fact that it made some progress in the 3rd quarter of the year by cutting costs and increasing margins. Moreover, part of the losses will be covered by state aid rebate worth £445 million. In addition to above-mentioned improvements, Northern Rock claimed to have increased its mortgage lending to £1 billion in the third quarter. In the first 2 quarters of 2009 the bank lent £1.3 billion; therefore, it is unlikely to meet government’s lending target of £4 billion by the end of 2009. Mr. Hoffman, however, is determined that Northern Rock will manage to meet government’s lending target for 2010 - £9 billion, despite all the difficulties the bank currently faces. Experts of the UK banking sector expect the sale of the 3 new banks to attract a number of foreign financial institutions, such as NAB or BBVA, on the British banking market.