Northern Rock’s £585m loss

Source: Exec Digital UK

Date :05/08/2008 10:54:25

Northern Rock has announced larger-than-expected losses of £585.4 million for the first half of the year.

Much of the deficit announced today, August 5, has been put down to the charges taken by the lender to cover losses from its struggling mortgage customers.

But Northern Rock has managed to repay £9.4 billion of a loan from the Bank of England, reducing the amount it owes to £17.5 billion.

The Government, which nationalised the lender in February after the first run on a UK bank for more than a century, will help out with a financial injection. Pausing repayments of Northern Rock’s taxpayer loan will convert £3 billion of the outstanding debt into equity.

Chancellor Alistair Darling told Radio 4's Today programme that Northern Rock found itself in a "very difficult situation", like other banks.

"Northern Rock needs more share capital," he said.

"It doesn't have shareholders now that... it's owned by the government, so it's got to come to us, so what we've said is that we will put in up to £3 billion.

"We've got to get state aid approval for that so we can't give a precise figure, but up to £3 billion may be necessary."