UKAR cuts debt by £4bn as profits halve

The 'bad bank' which runs loans granted by Northern Rock and Bradford & Bingley before their financial crisis bailouts has repaid its £48.7bn taxpayer loan.

UKAR said it had made £3.1bn in loan repayments to the state in 2012 and a further £900m in interest payments on its taxpayer-funded loans, according to the body’s latest full-year financial report.

The payments took the total size of UKAR’s outstanding debt to £43.4bn. This compares to £48.7bn when the bad bank was created in October 2010, reports The Telegraph.

“We still have a long way to go, but it remains our expectation and determination to repay that debt in full,” said Richard Pym, chairman of UKAR.

Statutory profits at UKAR halved year-on-year from £1.4bn in 2011 to £691m last year. UKAR said the fall was largely a result of lower profits in 2012 from buying back and cancelling its own debt, as well as the increased cost of paying out payment protection insurance mis-selling claims. UKAR said total PPI claims had cost it £360m to date.

UKAR’s sole purpose is to manage the run-off of the bad loans made by Northern Rock and Bradford & Bingley. According to its accounts, the number of mortgages handled by it fell from 638,000 in 2011 to 587,000 last year, while unsecured personal loan accounts fell from 278,000 to 228,000.

The number of accounts in arrears of three or more months fell last year by 23pc to 25,581, which Mr Pym described as an “impressive” result.