David Prosser: Northern Rock repays its saviours

Outlook So much for the bad bank. It is increasingly clear that, over time, taxpayers are going to make a tidy little sum from the closed book of mortgages that will remain in public ownership even after the rest of Northern Rock is sold off. Even stripping out one-off accounting effects, the profit the bad bank booked yesterday was close to £170m.

The maths are not difficult. Around £50bn worth of mortgages are sitting within the business, while taxpayers' exposure to the unit is in the form of a loan worth around £22.5bn. Cases of mortgage arrears are running at around 5.6 per cent of the book, but even if all those cases were to become fully fledged defaults, there would still be ample proceeds from repayments to pay off the taxpayer loan and provide a juicy profit on top.

Meanwhile, the part of Northern Rock that will one day be sold is struggling, with too few mortgages to service its depositor base. One wonders, in retrospect, whether the split between good and bad was too conservative. While the cautious approach is understandable, it may mean we have to wait longer to get the good bank off the state's books – or that the process will realise a smaller price.

That said, the performance of the two arms of Northern Rock combined is a tribute to the intervention, led by Alistair Darling, that prevented the bank's total collapse. It also prompted another round of whingeing yesterday from former shareholders in the bank, who believe these profits prove they have been cheated of compensation they should have received following nationalisation. They forget, conveniently, that there simply would have been no Northern Rock without the taxpayer rescue.