Northern Rock sinks to loss

By Steve Slater

LONDON (Reuters) - Northern Rock, the British government-owned bank, sank to a loss last year and expects more losses for the next three years as rising bad debts on risky assets and home loans added to the impact of its funding crisis.

Britain's biggest casualty of the global credit crisis, Northern Rock on Monday reported a statutory loss before tax of 168 million pounds ($334 million) in 2007, swinging 795 million pounds from its profit of 627 million in 2006.

The UK's fifth-biggest mortgage lender, nationalised last month and which owes 24 billion pounds to the Bank of England, said it expects to remain "significantly loss-making" in 2008.

It expects to break even in 2011 and is confident of repaying its emergency loan from taxpayers by the end of 2010 by shrinking its balance sheet, but it refused to say if it could return to profit any earlier.

Ron Sandler, the trouble-shooter running Northern Rock for the government, said he will limit the bank's share of UK retail deposits and new mortgage business so it does not get an unfair advantage as he gave more details of his business plan.

The government aims to return to the bank to the private sector once taxpayers have been repaid.

"We intend to contract to a smaller, more sustainable business," Sandler told reporters on a conference call.

The bank aims to redeem about 60 percent of mortgages when they come up to maturity, and is considering working with other lenders who could take on the loan. Sandler said between 25 and 30 billion pounds of loans will come up for renewal this year.