Northern Rock posts £167.6m loss and pays ex-chairman £760k

by Gill Montia

Story link: Northern Rock posts £167.6m loss and pays ex-chairman £760k

Northern Rock has reported a loss of £167.6 million for 2007, compared with a profit of £627 million in 2006.

Exceptional costs in connection with a strategic review and writedowns on mortgages and unsecured loans both contributed to the poor result.

Ron Sandler, the bank’s new chairman, has warned that the business is unlikely to break even until 2011.

Northern Rock’s previous chairman, Adam Applegarth, will receive a leaving settlement comprising £760,000 in pay, his pension entitlement and the continuation of his mortgage with the bank, at preferential rates.

Mr Applegarth held the post of chairman for six years and was responsible for devising and implementing the bank’s business plan which has been criticised for its over-dependence on wholesale funding and aggressive policy of expansion.

The mortgage bank expects to pay the Bank of England the £24 billion it currently owes in connection with its rescue by 2010, and should dispense with it Treasury guarantee by 2011.

Mr Sandler said: “Looking ahead we have developed a business plan that we believe will help drive the bank back towards profitability and ensure it has a sustainable future and remains an important employer in the North East.”