Northern Rocks results and the news that a further £3b is going into the equity of the business has set alarm bells ringing today.
The Company announced worse than predicted losses of £585m for the first half of the year,worse because much of this related not to one off charges connected to the restructuring of the business but to cover an ever increasing bad debt provision.
This make the government's promises that the initial loan was secured on a strong asset book look even more shallow.In a away this as the trade off for paying back more than £9b of the initial loan.To achieve this the Rock encouraged customers that could leave to take their business elsewhere.
Unfortunately leaving themselves with the bottom end of the business and a particularly its so called together mortgages which encouraged householders to take out loans in excess of 100% of their property.
According to Vince Cable some £6b of loans are now classed as unsecured.
It seems that the government's intention to re float the Rock is now a long way off
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