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11 Jan, 2008

Robert Thickett
Date: 11-Jan-2008

Northern Rock has revealed it's selling its portfolio of lifetime equity release mortgages to US investment giant JP Morgan.
The portfolio comprises gross assets with a balance sheet value of £2.2bn, which is about 2% of the firm's total assets.

It earned net interest income of £34m during the 12 months to 30 June 2007.

But in view of the struggling UK bank's future funding costs under the facilities with the Bank of England, on which interest is charged at a penal rate, the future net interest income which would have been earned on the portfolio would have been a lot lower.

The proceeds from the sale will be payable in cash and will help pay off its current loan to the Bank of England.

As part of the deal, NR will continue to service the lifetime portfolio on behalf of JPMorgan and continue to originate lifetime loans to its balance sheet.

Andy Kuipers, chief executive of NR, says: "This is a relatively small transaction, representing around 2% of Northern Rock's gross assets, but it is a positive development in the company's ongoing strategic review.

"It illustrates the quality of our assets, which has enabled us to achieve a sale at a premium despite continuing difficult financial markets, and will allow the Company to reduce its debt to the Bank of England."

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