Northern Rock, the Government-owned mortgage lender, has been forced into a raft of new sub-prime writedowns that will see its total impairment charge nudge £400m

In total, writedowns are understood to have increased by 40 per cent from £281m in December to around £395m this month, with the Rock's £167m US CDO portfolio virtually worthless because of deteriorating economic conditions.


The bank will also detail how much money it has paid advisors for the strategic review that led to the Government's decision to nationalise it. It is understood Northern Rock's investment banking advisors Merrill Lynch, Citigroup and Blackstone - who at one stage hoped to share a success fee of £75m - have so far been paid just £5m between them.

But the bank will say it has paid more than £50m to its legal and accountancy firms - including City firm Freshfields Bruckhaus Deringer and PricewaterhouseCoopers - whose fees are based on an hourly rate.

Meanwhile Northern Rock is in the midst of an internal communication programme with the 85 per cent of its staff who participated in its employee share schemes and who are almost certain to lose all their money. Those who have been with the company for up to 10 years will have lost an average of £10,000.

The annual report will also detail the pay-off of former Rock chief executive Adam Applegarth, thought to have received a golden handshake worth more than a million pounds. The deal has been criticised by shareholders.

Applegarth's successor Ron Sandler will also use the report to flesh out his plans for Northern Rock and will say the bank's mortgage book has already been considerably reduced by customers moving their mortgages elsewhere.



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