2025 estimate is given to fully repay PS34.1bn; FINANCE.
Byline: TOM KEIGHLEY email@example.com
THE company which manages the assets of Northern Rock and Bradford and Bingley said it has repaid a further PS500m to the Treasury.
UK Asset Resolution Limited, which was set up in 2010 to manage assets from the wreckage of the financial crisis, reduced its balance sheet by PS8.5bn in the six months ended September 30.
It means UKAR has now reduced its balance sheet by a total of PS58.2bn since 2010, and has repaid PS14.6bn to the government in that time.
The organisation now expects to fully repay the PS34.1bn still owed to government by roughly the end of 2025.
By the end of its current financial year UKAR expects to have paid PS4.1bn off that amount during the 12 months.
Richard Banks, UKAR chief executive, said: "UKAR has continued to make good progress over the past six months, with a further PS8.5bn reduction in our balance sheet. Arrears continue to fall and we remain committed to working with our customers to help them plan for the future. "Earlier this year we commenced two transactions; the sale of PS13bn of assets and the divestment of the mortgage servicing operation. Both are proceeding to plan."
Underlying profit before tax for the period was PS612.1m, a decrease of PS80.8m from September 2014.
The firm said this was in line with expectations and largely due to lower net interest income as a result of the shrinking balance sheet. This is a trend that will continue as UKAR winds up the mortgage books of the now defunct banks.
UKAR is currently in the process of selling PS13bn worth of mortgages known as the Granite portfolio to a selection of other banks - a process it hopes will deliver a cost effective way to achieve its goals and create headroom to operate under. Mr Banks added: "The challenge that we have is that our cost base will remain while we continue to reduce the balance sheet. We're already starting to see that happening but that's why we're doing things like the Granite sale. We've already made some good cost savings which total about 34% over the last five years, but it will be increasingly difficult to make further savings without such sales."
In July the Court of Appeal overturned a decision that would have seen NRAM - the part of UKAR that handles Northern Rock assets - pay out nearly PS270m to customers of "Together" mortgages.
Uncertainty about whether customers who borrowed less than PS25,000 were protected by the Consumer Credit Act 1974 led UKAR to raise a test case against an employee who held such a mortgage.
The High Court originally ruled that 41,000 borrowers should be paid an average of PS6,292 each but this was subsequently overturned.
Mr Banks added: "We've always wanted to do the right thing by our customers but in this case it was always unclear. That's why we went to the courts. It didn't seem appropriate to use taxpayers' money to make payments that weren't clear. The result is PS268m saved for the taxpayer, and I think that's a good thing."
Richard Banks, CEO of UKAR at Northern Rock's HQ in Gosforth