Northern Rock was formed in 1965 as the Northern Rock Building Society. Over the next 20 years, the bank acquired around 53 smaller building societies. In 2007, the bank gained promotion to the FTSE 100 Index, but owing to the banks nationalization in 2008, it was removed from the exchange.
Huge Losses Reported at Northern Rock
The British nationalized bank Northern Rock has reported pre-tax losses of £1,336 million for 2008. This is mainly thought to be due to borrowers falling behind on their mortgage repayments in the current financial turmoil.
The second half of the year saw a 32% increase on the trend of losses.
Philip Hammond, the Shadow Chief Secretary to the Treasury stated: "The government promised us time and time again that Northern Rock had a good mortgage book. But these announced rises in arrears and repossessions show that Alastair Darling has led taxpayers up the garden path".
In 2008, the amounts of home repossessions caused by Northern Rock rose 63%.
Alastair Darling recently said that Northern Rock would reduce the rate that it is paying back its debt to the government and that in 2009, the bank would increase their mortgage lending by £5 billion. In 2010 it would then increase its mortgage lending by between £3 billion and £9 billion.
During 2008, the bank lent £2.9 billion to the public, down from nearly £30 million in 2007.
On 14 September 2007, Northern Rock received financial support from the Bank of England following problems on the credit markets. This led to thousands of the bank's customers queuing outside branches across the UK aiming to withdraw their savings. On 22 February 2008, partly as a result of the rushed withdrawal of savings in late 2007, the bank was taken into state ownership by the British government. The bank is managed by UK Financial Investments Limited.
The Beginning of Problems at Northern Rock
As of September 2008, the bank announced that it was well ahead in paying back the government. By then, the bank owed £11.5 billion out of an original £26.9 billion.
Originally, the bank aimed to repay its debt to the government within three or four years. By October 2008, customers regained their confidence in the bank and a surge of new accounts were opened. The customers seemed to recognise that the bank could not fail due to it being owned by the state.
Northern Rock is one of the top 5 mortgage lenders in the UK in terms of gross lending.
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