Northern Rock's "bad bank" back in black

Northern Rock Asset Management , the remnants of Britain's first major victim of the credit crisis, said it had returned to profit in the first half of the year after heavy losses a year ago.

Northern Rock's so-called "bad bank" – one of the two legal entities into which the original company was split – reported a pre-tax profit of £349.7m compared with a loss of £724.2m a year earlier.

However, Northern Rock PLC, the "good bank" holding savers' deposits, made a pre-tax loss of £142.6m.

This is the first set of results since Northern Rock was split into two at the beginning of this year.

Since 1 January, savers' money has been held by Northern Rock PLC, which is expected to be sold later this year.

The other part of the old bank - which was renamed Northern Rock Asset Management - holds most of the bank's old mortgages and unsecured loans.

Northern Rock chief executive Gary Hoffman said: "The company is continuing to show improving underlying profitability and 90 per cent of the mortgage book remains fully performing."

The company added that charges on bad loans had also fallen.