The companies born from the split of the old Northern Rock group, the nationalised British bank which was the UK's first major credit crisis victim, reported contrasting fortunes today in their interim results.
Northern Rock Asset Management - the so-called "bad bank" bit of the old group - posted a pretax profit of £349.7 million, boosted by lower bad debt charges, compared with a loss of £724.2 million a year earlier.
However, its other legal division - the Northern Rock "good bank" which manages new mortgages and savings - reported a loss, partly as a result of the costs related to its separation from Northern Rock Asset Management.
Earlier this year, Northern Rock was officially split into the two different divisions, representing its "good" assets and "bad" assets. Northern Rock Asset Management (NRAM) represents the "bad" bank which comprises existing mortgages and unsecured loans.
Northern Rock Asset Management's positive earnings numbers follow the trend set by larger rivals such as HSBC and BNP Paribas which also had higher profits due to fewer bad debt costs.
Last week, state-owned UK mortgage lender Bradford & Bingley also said it had swung to a first-half profit after making a loss last year thanks to lower costs and mortgage arrears.
Northern Rock was nationalised in February 2008 after encountering major problems during the credit crisis, when its business model of borrowing short-term funds from wholesale markets to lend to mortgage borrowers lay in tatters.
UK Financial Investments, the state body which manages the government's stakes in fully and partially nationalised banks, plans to merge Northern Rock Asset Management with Bradford & Bingley.
The government, keen to raise money to cut the country's deficit, also hopes to sell the Northern Rock "good bank" back to the private sector.
Gary Hoffman, who is chief executive of both Northern Rock Asset Management and Northern Rock, said there was still no deadline regarding an eventual return of Northern Rock Plc to the private sector.
"There is no deadline, no timetable, no process," he told reporters on a conference. "We remain committed to returning to private ownership when the time is right."
During the first six months of its existence, Northern Rock Plc posted a loss of £140 million.
Along with the costs associated with its split from the "bad bank" part of the original business, the new group also incurred costs related to a previously announced plan to cut jobs.
Last month, Northern Rock said it planned to cut up to 650 jobs by the end of the year.
Mr Hoffman declined to say by when he expected the Northern Rock business to become profitable, but added the new company was "on the right trajectory".
"We've got a good platform for growth. We've got a brand that's resilient."
Reuters