Northern Rock has warned that the continuing economic downturn is making it a ‘lot harder’ for the bank to repay its £11.5 billion government loan . To date the bank has repaid £15.4 billion of its £26.9 billion loan, but has been forced to make £111 million of write downs in the third quarter, further eroding any remaining capital.
Northern Rock chairman Ron Sandler reaffirmed the bank’s commitment to repaying the loan by 2010, but said, ‘the world has become more challenging and it will be harder to maintain the aggressive rate of redemptions’. The bank has improved its position by encouraging existing homeowners to redeem their loans and remortgage with rival banks, enabling the lender to keep up with its government loan repayments to date.
Northern Rock’s position has also been improved its nationalisation earlier this year. The security of being a government backed bank has seen an influx of savings into the bank, with an estimated £3 billion in savings deposited with the bank since the end of June, taking total customer deposits with the bank to £17.2 billion. The bank has even had to restrict new savings accounts by withdrawing some of its products, due to a clause in the nationalisation agreement that states it may only take 1.5 per cent of the UK savings market .
Nationalised Bank Facing Struggle to Repay Government Loan in Time
Nationalised Bank Facing Struggle to Repay Government Loan in Time
Mon, 27 Oct 2008
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