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A shrunken Crock

How sweet. “Consistent with the spirit of the Framework Document,” under which former mortgage bank Northern Rock resides in temporary public ownership, Rock has promised to continue acting like a real, solvent, listed company — publishing trading statements, interim management reports and financial statements to keep us all amused informed.

So what have learnt? Executive chairman Ron Sandler:

I am pleased to report that solid progress has been made against our business plan. The Bank of England loan facilities are reducing and the balance sheet is contracting as a result of planned mortgage redemptions. While arrears have increased, the credit quality of the loan book remains satisfactory and at a level assumed in the plan. Clearly the outlook for the UK mortgage market is uncertain but progress against our business plan to date is encouraging. We remain firmly focused on our business priorities of repaying the Government debt, releasing the guarantee arrangements and, in due course, returning Northern Rock to private ownership.

- Three month mortgage delinquencies have jumped from 0.57 per cent at end-December to 0.95 per cent at the end of April.

- Gross residential mortgage lending in the first quarter was “a modest” £1.2bn.

- Retail savings balances have “begun to recover” and stood at £12.8bn at the end of the quarter.

- Tighter standards on capitalising arrears will lead to higher levels of reported arrears over the coming months.

- Most of the expected 2.000 job losses will occur this year.

Outlook statement:

While recent actions taken by central banks to improve the functioning of financial markets are welcomed by Northern Rock, the outlook for the UK mortgage industry remains highly uncertain. The Company does not expect market conditions to normalise in the short term. This environment presents Northern Rock with challenges, especially as regards the Company’s ability to meet its targeted mortgage redemption levels in the future. Nevertheless, given this backdrop, the Company’s progress against its Plan to date is encouraging.

This entry was posted by Paul Murphy on Monday, May 12th, 2008 at 10:02 and is filed under Capital markets. Tagged with . You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

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Comments

  1. May 12   18:41 Posted by Ex mortgage broker [report]

    The capitalisation of arrears seems to have worked as follows

    You owe crock 200K on an interest only mortgage. Your repayments are circa £1400 a month. You miss 5 payments and now owe 207K (ignoring fees.)

    You agree to increase the repayments to £1500 and make one payment.

    With the old policy Hey Presto no arrears you just have a mortgage for £207K interest only over 25 years. The new policy you need to make 3 payments on time before they move it from arrears to the loan itself.

  2. May 12   16:03 Posted by phil5 [report]

    http://www.order-order.com/2008/05/northern-rock-shareholders-offer-to-buy.html

  3. May 12   14:05 Posted by Monkey [report]

    ML chat referred to a change in basis of provisioning/capitalisation of arrears though. If they count delinquancies as a % of loan recorded on balance sheet vs overdue capital that could distort the figure. Effectively they are being more prudent on the amount of debt they recognise as an asset - need to know how this figure is calculated in order to assess significance of the 0.57% to 0.97% jump

  4. May 12   13:17 Posted by Anonymous [report]

    Some borrowers’ circumstances are likely to have changed for the worse (separation, reduction in income, credit card arrears) since taking out their N Rock mortgage,which means no other lender will touch them if the LTV is above 85% so if they have to stay with N Rock on the Standard Variable Rate they are definitely going to be struggling to meet the repayments. An increase in mortgage delinquencies is across the market, not just N Rock.

  5. May 12   10:18 Posted by R Wyand [report]

    0.57% to 0.97% is a big jump, but when you put it in the context of the 5.82% rate of deliquencies they have in america it actually seems a bit reassuring.

  6. May 12   10:06 Posted by grayder [report]

    The first thing that sticks out to me is the jump in mortgage delinquencies from 0.57% to 0.97%

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