Northern Rock & Giant Space Rocks......

Generali

michaels wrote: »

Or possibly just illiquid

Haha, yeah sure. Perhaps NRK was illiquid.

It's rather like saying the Sahara isn't a desert it lacks liquidity.:money:

HAMISH_MCTAVISH

michaels wrote: »

Or possibly just illiquid

LOL - took the words right out of my mouth.:p

As you both know I'd argue there's a material difference between insolvency caused by a global liquidity crisis and insolvency caused by trading losses due to an non-performing loan book.

NR was the former, not the latter, and their UK residential mortgage book has continued to deliver significant profits for UKAR even after nationalisation.

Generali

HAMISH_MCTAVISH wrote: »

their UK residential mortgage book has continued to deliver significant profits for UKAR even after nationalisation.

I'm not sure that you're qualified to say that.

Hell I'm not qualified to say that and I'm an analyst of a sort.

HAMISH_MCTAVISH

Generali wrote: »

I'm not sure that you're qualified to say that.

Oh I'm most certainly not qualified to say that.

But it's not me saying it....

Britain’s ‘bad bank’ – set up to deal with the wreckage of Northern Rock and Bradford & Bingley – is more profitable than Royal Bank of Scotland, TSB and Virgin Money put together.

UK Asset Resolution (UKAR) posted an 11 per cent jump in profits to £1.4billion for the year until the end of March

http://www.thisismoney.co.uk/money/markets/article-3127261/Bad-bank-hits-profit-Lender-set-deal-wreckage-Northern-Rock-Bradford-Bingley-profitable-RBS-TSB-Virgin-Money-together.html#ixzz3rMxqr7Q0

Similar articles have appeared annually since UKAR was formed....

Generali

HAMISH_MCTAVISH wrote: »

Oh I'm most certainly not qualified to say that.

But it's not me saying it....


http://www.thisismoney.co.uk/money/markets/article-3127261/Bad-bank-hits-profit-Lender-set-deal-wreckage-Northern-Rock-Bradford-Bingley-profitable-RBS-TSB-Virgin-Money-together.html#ixzz3rMxqr7Q0

Similar articles have appeared annually since UKAR was formed....

Because of kitchen sinking.

It's common practice in finance. You take every loss that you can in one or two accounting periods and the only way is up from there.

The bad bank doesn't have any business as such as it doesn't write any new business. It just holds a bunch of fixed income assets, mortgages.

Those assets were written down aggressively in the first instance and have been written up in value as interest rates have declined. You simply can't compare NRAM to a normal company. P&L just reflects changes to the value of the underlying assets and cash flows as debtors pay down their mortgages. This isn't like a normal business where you buy or make something at one price and sell it for another. NRAM has done all its making a very long time ago.

Thrugelmir

Rinoa wrote: »

NR Mortgages sold for $13Bn - and at a profit too.

Above book value. So rather subjective. Good PR though. Better than selling at a perceived loss.

Thrugelmir

michaels wrote: »

Or possibly just illiquid

Took 7 months for the Treasury to unravel the financial complexity of Northern Rock (and their offshore vehicle Granite). Given it was just a mortgage / loan provider you have to wonder why.

Nor forget that Directors were misreporting arrears figures. This would result in a complete lack of confidence as to the true state of the financial position. What else was being covered up.

Thrugelmir

their UK residential mortgage book has continued to deliver significant profits for UKAR even after nationalisation.

Winding up the good loans is the easy part. Eventually the dregs will be left. Then significant costs may well be incurred well above any income generated.

Generali

Thrugelmir wrote: »

Winding up the good loans is the easy part. Eventually the dregs will be left. Then significant costs may well be incurred well above any income generated.

In theory that should be covered by the impairments charge.

I suspect that a large part of the 'profit' is simply the uplift to the value of a fixed rate mortgage by interest rates falling and more recently spreads falling too.

Thrugelmir

Generali wrote: »

In theory that should be covered by the impairments charge.

When dealing with thousands of individual debts and assets where do you start to quantify the likely outcome.