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| Northern Rock makes a £585m loss | Northern Rock makes a £585m loss |
| (10 minutes later) | |
| Northern Rock has announced bigger-than-expected losses of £585.4m for the first six months of the year. | Northern Rock has announced bigger-than-expected losses of £585.4m for the first six months of the year. |
| Much of the loss came from the charges it takes to cover losses from struggling mortgage borrowers. | Much of the loss came from the charges it takes to cover losses from struggling mortgage borrowers. |
| But it also managed to repay £9.4bn of a loan from the Bank of England, reducing the amount owed to £17.5bn. | But it also managed to repay £9.4bn of a loan from the Bank of England, reducing the amount owed to £17.5bn. |
| The government, which nationalised the lender in February after the first run on a UK bank in more than a century, will inject £3bn to help its finances. | The government, which nationalised the lender in February after the first run on a UK bank in more than a century, will inject £3bn to help its finances. |
| 'Mega rights issue' | 'Mega rights issue' |
| The money for the cash injection will come by pausing repayments of the giant taxpayer loan made to the bank, and about £3bn of that will be converted into equity. | The money for the cash injection will come by pausing repayments of the giant taxpayer loan made to the bank, and about £3bn of that will be converted into equity. |
| FROM THE TODAY PROGRAMME More from Today programme | FROM THE TODAY PROGRAMME More from Today programme |
| "Or to put it another way, the nationalised bank is having a mega rights issue that taps its one shareholder," BBC business editor Robert Peston said. | "Or to put it another way, the nationalised bank is having a mega rights issue that taps its one shareholder," BBC business editor Robert Peston said. |
| "It is similar to what other banks have been doing recently, where they have been having rights issues." | "It is similar to what other banks have been doing recently, where they have been having rights issues." |
| "But the £3bn is taxpayers money - that is money that is very much at risk." | "But the £3bn is taxpayers money - that is money that is very much at risk." |
| 'State aid approval' | 'State aid approval' |
| Chancellor Alistair Darling told Radio 4's Today programme that Northern Rock, like other banks, found itself in a "very difficult situation". | Chancellor Alistair Darling told Radio 4's Today programme that Northern Rock, like other banks, found itself in a "very difficult situation". |
| "Northern Rock needs more share capital," he said. | "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 £3bn. | "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 £3bn. |
| "We've got to get state aid approval for that so we can't give a precise figure, but up to £3bn may be necessary." | "We've got to get state aid approval for that so we can't give a precise figure, but up to £3bn may be necessary." |
| Arrears increasing | Arrears increasing |
| Northern Rock revealed that the total percentage of its residential mortgage customers in arrears and being repossessed had risen sharply from last year. | Northern Rock revealed that the total percentage of its residential mortgage customers in arrears and being repossessed had risen sharply from last year. |
| If the government tried to sell the Rock into the private sector right now, the loss would be colossal Robert PestonBBC business editor class="" href="http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/08/treasury_injects_3bn_into_rock.html">Read Robert's blog in full In June 2007 the figure stood at 0.38% of mortgages, but it has now risen to 1.18%. That however, is lower than the Council of Mortgage Lenders average of 1.21%. | |
| The company said this is due to more difficult economic and market conditions. | The company said this is due to more difficult economic and market conditions. |
| The number of house repossessions has also risen from 2,215 to 3,710 - an increase of 67%, which represents 0.56% of all mortgage accounts. | The number of house repossessions has also risen from 2,215 to 3,710 - an increase of 67%, which represents 0.56% of all mortgage accounts. |
| The company says this is because it is moving to repossess properties more quickly when it is clear that customers will not be able to maintain their mortgage payments. | The company says this is because it is moving to repossess properties more quickly when it is clear that customers will not be able to maintain their mortgage payments. |
| Debt staff | Debt staff |
| In a further sign of customers finding it harder to make ends meet, it also said it was increasing staff numbers in debt management from 185 to around 500. | In a further sign of customers finding it harder to make ends meet, it also said it was increasing staff numbers in debt management from 185 to around 500. |
| Northern Rock had advanced some loans worth as much as 125% of home values, to some customers. | Northern Rock had advanced some loans worth as much as 125% of home values, to some customers. |
| However arrears among those "Together" mortgage holders have soared from 0.73% a year ago to 2.14% this June. | However arrears among those "Together" mortgage holders have soared from 0.73% a year ago to 2.14% this June. |
| Many of those customers could be left in a position of negative equity - where the value of the mortgage exceeds the value of their house, and may also struggle to find other sources of finance when their current loans end. | Many of those customers could be left in a position of negative equity - where the value of the mortgage exceeds the value of their house, and may also struggle to find other sources of finance when their current loans end. |
| Loans reduced | Loans reduced |
| Northern Rock was hit hard by the global credit crunch, when its main method of financing mortgage loans - by borrowing cash from the wholesale markets - dried up. | Northern Rock was hit hard by the global credit crunch, when its main method of financing mortgage loans - by borrowing cash from the wholesale markets - dried up. |
| The bank, once Britain's fifth-biggest home loan provider, was taken into public ownership after it failed to find a suitable buyer from the private sector. | The bank, once Britain's fifth-biggest home loan provider, was taken into public ownership after it failed to find a suitable buyer from the private sector. |
| In another sign of its scaling back, Northern Rock has reduced the number of its mortgage accounts by 15%, to 662,000 at the end of June compared to 777,000 at the end of 2007. | In another sign of its scaling back, Northern Rock has reduced the number of its mortgage accounts by 15%, to 662,000 at the end of June compared to 777,000 at the end of 2007. |
| Loans and advances to customers have also been cut back - by £14.5bn in the first half of the year to £84.4bn. | Loans and advances to customers have also been cut back - by £14.5bn in the first half of the year to £84.4bn. |