Northern Rock narrows loss

Nationalised lender Northern Rock posted a first-half loss of £78.8m and said it continues to work on plans for an eventual sale of the company back to the private sector.

Last year it made a first-half loss of £140m, and the company said it now expects to start trading profitably some time in the second half of 2012.

Northern Rock was fully nationalised three years ago after nearly collapsing during the credit crunch. Chancellor George Osborne said in June that he aimed to find a buyer for it this year.

Aggressive lending practices caused the bank's near collapse in 2007 when borrowing dried up and Britain propped up Northern Rock with £1.4bn of taxpayers' money during the crisis. It had liquid assets of £5.9bn at the end of 2010, and posted a loss of £232m for that year.

After its near-collapse, Northern Rock was split into a "good bank" comprising new mortgages and savings and a "bad bank" holding its toxic assets.

The "good bank" is the part being sold, while the government continues to wind down and run off the "bad bank's" toxic assets although these could also be sold to a private party.

Two sources with knowledge of the matter have told Reuters that Virgin Money submitted an expression of interest for Northern Rock.