State-owned Northern Rock shrank its losses in 2009, helped by a lower bad debt charge in the second half as house prices stabilized, but arrears rose and the lender warned loan impairments would stay high in 2010.
We still think the recovery is going to be uncertain and will take some time, Chief Executive Gary Hoffman said.
The bank, nationalized two years ago and now being prepared for a return to private ownership, said its underlying pretax loss shrank to 383 million pounds ($574.5 million) from 1.29 billion, thanks to improved net interest income, as more mortgage customers stayed after their fixed-rate deals expired.
But its loan impairment charge rose to 1.04 billion pounds from 894 million a year earlier and the proportion of mortgages three months or more in arrears rose to 4.28 percent at the end of December from 2.92 percent.
That compares with a UK sector average of 2.38 percent and is largely down to Northern Rock's infamous Together mortgage. Excluding that product, which allowed customers to borrow more than the value of their home and accounts for 30 percent of the total book, arrears climbed to 3.1 percent.
Reflecting a still uncertain but rosier outlook for the UK market seen across the sector, Northern Rock said arrears stabilized in the final quarter but warned loan impairments would stay high through the year, though below 2009.
Earlier this year, the bank was officially split into a good bank -- new mortgage and savings unit Northern Rock, which the government hopes to sell -- and a bad bank, Northern Rock Asset Management, which includes existing mortgages and unsecured loans and could remain in government hands.
Wednesday's results, for the whole of the old bank, were published under Northern Rock Asset Management.
Asked about interest from potential buyers for either side of the bank, Hoffman reiterated he had held only informal talks.
There is no timetable, I have been set no deadlines by the government. There is no rush, he told reporters. We have created something that will be attractive to private investors but there is no formal process.
The bank, a former building society, has not been immune to public outrage over pay and Hoffman said Wednesday he would follow other UK bank executives and waive his 700,000 bonus.
In total, bonus payments will cost the bank 14.9 million pounds, including a 1.5 million pound bonus tax payment. Only 32 of its staff, however, will receive bonuses above 25,000 pounds.
The British Treasury lifted its guarantee on most retail deposits with nationalized Northern Rock late last month, marking a milestone in the bank's turnaround.
The 100 percent guarantee, introduced in September 2007 to stop a run on the bank, had been under review since the start of the year. Its removal is key for suitors eyeing Northern Rock, as buyers will be keen to see that deposits stay in the bank without the government's safety net.
(Editing by Will Waterman and David Holmes)