Loss making state owned bank Northern Rock to pay £13 million in bonuses

Northern Rock - Still in the Woods

Northern Rock – Still in the Woods

The state owned lender Northern Rock will pay £13 million in employee bonuses despite suffering losses of £232 million in 2010.

The Newcastle based bank was taken over by the government to prevent from collapsing three years ago. The 4,500 employees of the bank, who make £20,000 annually on an average, will receive and average bonus of £3,000.

The government had decided to split the company into two parts last year, forming the so-called ‘good bank’ – Northern Rock Plc. and the ‘bad bank’ – Northern Rock Asset Management (NRAM). NRAM however, reported a profit in the first half of last year after it nonperforming portfolio improved.

However, Northern Rock Plc. reported a loss in of £140 million in the first half of 2010, which improved to £90 million in the second half.

Northern Rock Chief Financial Officer Jim McConville will receive a bonus of £185,000, said Executive Chairman Ron Sandler.

“Financial performance was in line with expectations in 2010”, announced Mr. Sandler while giving out the numbers.

“While it is always disappointing to report a loss, this in part reflects the high level of liquidity held, the costs incurred in relation to the government’s retail and wholesale guarantees, which have now been removed, and other exceptional costs incurred as the company was restructured”, he added.

Northern Rock had incurred exceptional expenses of £59.9 million to restructure its businesses and paid £33.2 million as premium for government funding guarantees.

The British government had created the UK Financial Investments Ltd. (UKFI) in 2008 to manage government investments in failed banks such as RBS, Northern Rock and Lloyds TSB group.

“We continue to work closely with UKFI on the strategic options for returning the company to private ownership, in the best interests of taxpayers, and we will provide a further update in this regard in due course”, said Mr. Sandler when asked about repaying government bail-out money, adding “all options remain firmly on the table, and no timetable has been set for a return to private ownership.”

“It is a complicated landscape, and it would be premature to speculate about the nature, the timing or the outcome of the process”, he said refusing to spell out a deadline for the same.

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