And so Northern Rock reveals a £585 million loss. It just goes to show that all those noises we heard about how the bank was profitable, and that people were panicking unnecessarily, were false. For a bank of Northern Rock’s size the loss is simply enormous.
Sure, the exodus of customers when it suffered the infamous bank run last September didn’t help. But the big reason given for its loss is debt write-downs for struggling mortgage holders. It now says 1.18 per cent of mortgage customers are struggling with payments – this is three times up on the amount seen before the credit crunch.
We were told Northern Rock didn’t do subprime lending and, therefore, its mortgage book was safe.
But, what it did do was 125 per cent mortgages.
Good, the bank has repaid £9.4bn. There’s just £17.5bn to go.
Not so good; the government is stumping up another £3bn, to boost the bank’s finances. That’s a £3bn investment.
A £3bn rights issue is simply massive. Not even the big US banks tried to raise that much money in one go.
On the Today programme Alistair Darling said Northern Rock was in a “very difficult” situation.
Ummm. For that matter so is Alistair Darling.
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