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Robert Peston
Business editor
Rock: Bad bank gone good
Northern Rock was nationalised in February 2008
There was big controversy in November when the government sold the so-called good bits of Northern Rock to Virgin at a loss which could be greater than £500m.
But the part of Northern Rock that is still owned by taxpayers, and has been combined with the mortgage book of Bradford and Bingley, today announced a very handsome profit for 2011 - of £1.1bn, an increase of 145%.
What is striking, just to labour the point, is that the annual profit on this business, now called UK Asset Resolution, exceeds the losses incurred by the Treasury on that contentious privatisation.
The reason for the big profit - which also allowed UK Asset Resolution to repay £2bn of money it borrowed from the Treasury - is that there has been a sharp reduction in loans going bad and running costs have fallen.
Even more encouraging, UK Financial Investments, which manages taxpayers' holdings in banks, estimates that the government will have generated a cash surplus of £10bn when all Northern Rock's mortgages are eventually repaid.
That would represent an annual rate of return in the region of 3.5% to 4.5% for the Treasury, which is perhaps a tiny bit better than what it costs the government to borrow. Or to put it another way, taxpayers may eventually end up with a genuine profit on the 2008 nationalisation of Northern Rock.
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Comment number 1.
Slug2nd March 2012 - 8:26
So the government running a bank sensibly without the need for inflated profits, bonuses and 'paying to retain talent' has generated a notional profit? Well if that's the case, perhaps the government should have taken over more of the banks......
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Comment number 2.
letusbefair2nd March 2012 - 8:30
Darling has been well and truly vindicated then.
Remember all of the doom and gloom mongering at the time, how much it was costing each of us the taxpayers. Do I now detect some humble pie in your last sentence, Robert? How much "per household" or "per taxpayer" is that as profit then?
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Comment number 3.
bigmouth strikes again2nd March 2012 - 8:33
'Or to put it another way, taxpayers may eventually end up with a genuine profit on the 2008 nationalisation of Northern Rock'
YOUR NEVER GETTING IT BACK
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Comment number 4.
mose2nd March 2012 - 8:34
So nationalisation works and privatisation doesn't? Back to the drawing board Dave!
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Comment number 5.
prudeboy2nd March 2012 - 8:48
I have maintained, for a short while, that the economy of the UK is the banks.
There is therefore little surprise that our government has got part of a failed bank working again.
At what cost though. What else does the UK do?
This may well please some.
As others flounder around in penury.
All for what exactly? - Hardly long term is it?
But there again what is around in the long term? Banking!!!!
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Comments 5 of 201