Northern Rock posts £140m loss

Bosses at the "good" side of the bank - spun off from the so-called "bad" part, Northern Rock Asset Management, in January - said the results were in line with expectations, despite being in the red.

But separate figures for Northern Rock AM, which houses the former bank's more toxic loans, showed a return to profit and further falls in bad debts.

Northern Rock AM reported underlying pre-tax profits of 167.3m in the six months to June 30 compared with a loss of 243.9m a year earlier.

The group still owes a mammoth 22.5bn to the taxpayer after Northern Rock's 2008 bail-out, having repaid only 300m in the half-year.

Bad debts at Northern Rock AM fell to 277.6m in the first six months of 2010, which is significantly lower than both the first and second halves of 2009.

It now has 47.2bn of residential mortgages on its books.

Repossessions fell 10 per cent, although the number of accounts three months or more in arrears increased as it continued to shrink the mortgage book, leaving more risky debts on its balance sheet.

Chief executive Gary Hoffman said the Northern Rock AM results were "encouraging".

"The company is continuing to show improving underlying profitability and 90 per cent of the mortgage book remains fully performing," he added.

But the group warned that loan loss charges would "remain high" throughout 2010, with unemployment and house prices key risks facing the lender and its borrowers.

There was little sign of an imminent sale of the mortgage and savings arm of Northern Rock, with management saying they continued to prepare the business for an "eventual return" to the private sector.

"But only when conditions are right to do so, in the best interests of taxpayers."

Today's results showed a drop in deposits at the "good" bank, following the removal of the Government's guarantee in May.

Deposits dropped to 17.6bn from 19.5bn at the start of the year.

Its bottom line was hit by costs, such as redundancy payments and a 27.7m fee for Government guarantees.