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UKAR makes £1bn profit; repays £2bn to taxpayers in 2011

  • 02/03/2012
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UKAR makes £1bn profit; repays £2bn to taxpayers in 2011
Taxpayer-owned UK Asset Resolution (UKAR), made up of bailed out banks Bradford & Bingley and Northern Rock (Asset Management), repaid £2.15bn of government funding in 2011, driven by a 10% reduction in lending balances.

UKAR’s first set of full-year results since its formation revealed combined pre-tax profits rose to £1.09bn in 2011, up from £444m in 2010, mainly due to lower loan impairment charges.

By comparison, partly-state-owned lenders Lloyds and RBS both made losses last year.

NRAM was the driver behind profit growth, with pre-tax profits rising to £789.9m in 2011, compared with £191.3m in 2010. It has now repaid £3bn of what it owes to the government since being split from “good bank” Northern Rock plc.

However, the group still owes £46.6bn “directly and indirectly” to the Treasury.

Nevertheless, UKAR chairman Richard Pym said it expected “to repay that debt in full without loss to the taxpayer”.

UKAR achieved all its the targets for 2011, managing to cut costs 21% to £220.6m and reduce its lending balances by £8.2bn, or 10%, to £75.3bn, including £6.5bn of residential mortgage redemptions.

Despite this, it remains the sixth largest mortgage lender in the UK.

Mortgage borrowers more than three months in arrears fell 14% from 38,515 to 33,216 at the end of 2011, contributing to UKAR’s new provisions for loan impairment dropping from £1.9bn to £390m.

Total UKAR loan impairment provisions were £2.25bn, including £1.65bn for residential mortgages.

B&B’s arrears fell 33% to 8,767, while NRAM arrears dropped 4% to 24,449 in 2011, falling for eight consecutive months after the peak in April 2011.

The total value of arrears owed by UKAR customers is now £233.9m, down almost £40m on 2010.

While it reported that more than 90% of its customers are fully up to date with repayments, it admitted that a “significant” number of customers are struggling. In order to help such borrowers, UKAR made 37,000 mortgage arrangements and account modifications in 2011, down from 44,000 in 2010.

However, repossessions increased slightly last year, up 3.8% to 2,705.

Together, arrears and repossessions accounted for 5.21% of the total number of accounts on UKAR’s books and 6.61% of the value.

Compensation for PPI mis-selling totalled £45m during 2011, with £154.1m remaining of what it set aside for redress. It reported that it continues to actively review PPI sales and has written to more than 90,000 customers.

Richard Banks, chief executive in UKAR, said: “We continue to make good progress against our objectives and made further significant repayments of the government loans.

“This improving performance is against a backdrop of challenging economic conditions and increasing hardship for some customers. Arrears and possessions are falling at B&B and we have stabilised the position with NRAM where arrears are now reducing due to our proactive approach.”

Chairman Pym added: “UKAR has a unique role as a business that has been tasked with the rundown of two major mortgage firms.

“Our people have done a good job of integrating the operations of B&B and NRAM and have made sure we have the right strategies in place to run down our balance sheet of more than £95bn and deliver maximum value for the taxpayer.”

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