UK ‘bad bank’ repays further £3.7bn to Government

The bank behind failed lenders Northern Rock and Bradford & Bingley has repaid another £3.7 billion to the Government and said plans to sell further assets to shrink its balance sheet were its “most ambitious” to date.

Tuesday, 16th June 2015, 9:15 am
Chancellor of the Exchequer George Osborne will welcome the latest announcement from UKAR

UK Asset Resolution (UKAR) - the state-owned firm responsible for winding down the mortgage books of the collapsed banks - said it had now repaid almost a third of government loans since it was formed in 2010 following the financial crisis, totalling £14.1 billion.

Including other payments, such as interest and taxes, UKAR said total payments to the taxpayer reached £4.4 billion in the year to March 31.

The group’s balance sheet also reduced by £8.8 billion in the year, down 43 per cent in total since 2010, helped by another £5.3 billion of mortgage redemptions as rising house prices and low interest rates have encouraged borrowers to look elsewhere for deals.

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UKAR heralded plans kicked off in April to sell around £13 billion of mortgage assets and to either sell or outsource the day-to-day mortgage servicing activities as transformational for UKAR.

It said the initiatives would “determine the next stage in our future”, with the mortgage asset sale five times greater than the £2.7 billion deal struck with a consortium led by US bank JP Morgan in 2014.

Announcing annual results, UKAR chief executive Richard Banks said: “Over the past four and a half years we have achieved excellent results, reducing the balance sheet by nearly £50 billion and overseeing a 70% fall in the number of mortgage accounts three or more months in arrears.”

Underlying pre-tax profits rose 11 per cent to £1.4 billion in the year to March 31 and UKAR said the number of mortgages three or more months in arrears fell by 23 per cent to 11,976.

Ultra-low interest rates have also helped customers keep up with repayments, with arrears owed by borrowers down by a quarter to £90.6 million.

The group now has almost 389,000 customers, down from 467,000 a year earlier, with 455,000 mortgage accounts and 106,000 unsecured personal loan accounts.

UKAR revealed it had set aside another £33 million for compensation for mis-selling of payment protection insurance (PPI) for the next three years, but said the flow of complaints had “reduced considerably”.