Northern Rock pays £15m bonus as losses narrow

State-owned mortgage lender Northern Rock is rewarding staff with a bonus pot of £14.9m for helping cut losses sharply in 2009.

Its last results before being split into its good half - Northern Rock PLC - and bad half - Northern Rock Asset Management (NRAM) - on 1 January, revealed a deficit of £257m, down from £1.36bn in 2008.

The bank, kept alive with £26bn of taxpayers' money, reported underlying losses fell from £1.29bn to £383m and actually swung into the black in the second half of the year.

Northern Rock chief, Gary Hoffman, waived his £700,000 bonus entitlement, following the example set by other bank chiefs.

Around 4,500 employees will get a share of the payout and 32 of the most senior managers can look forward to carving up a £3m bonus pool, about £94,000 each.

Improved net interest income and a reduced loan impairment charge were the main drivers behind the improvement, with a statutory profit of £466.7m in the second half of 2009, compared to a loss of £724.2m in the first half.

Total income in the year improved to £1.1bn (2008 £254.4m), including the State aid claw back of £200m. Costs reduced by 32%, to £295.9m in 2009 (2008 £433.3m).

Gross residential lending rose to £4.2bn in 2009, compared with £2.9bn in 2008 reflecting the company's revised strategy to increase mortgage lending in support of mortgage market capacity. Northern Rock PLC, which the UK government hopes to sell eventually, is committed to offering up to £14bn of new mortgage lending in 2009/2010.

Residential mortgage accounts over three months in arrears, including Together loans, were 4.28% at end 2009, compared with 2.92% at 31 December 2008. Excluding Together, residential mortgage accounts over three months in arrears are 3.10%, compared with 2.25% at end 2008.

On 1 January, NRAM ceased to offer new mortgage lending and transferred £10.3bn of residential loans to Northern Rock.

Last month, the government told savers with money in the Northern Rock PLC would lose the state's 100% guarantee on their deposits from 24 May.