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Northern Rock bailout set to reap £11bn profit

Northern Rock's period of public ownership should generate a profit of up to £11bn for the taxpayer over the next 10 to 15 years, the body responsible for the Government's bank investments said.

Just under £37bn was used in bailing out the two companies that comprise the former Northern Rock, but over time UKFI expects the return of cash will be between £46bn and £48bn.

This includes the recent sale of Northern Rock to Virgin Money in a deal that could value the business at £1bn, as well as repayments and the winding down of Northern Rock Asset Management, which houses a portfolio of mortgages and unsecured loans and remains under Government ownership.

Including the closed mortgage book assets of Bradford -amp; Bingley, UKFI said the return of cash is expected to total between £95bn and £97bn over time, compared with £64bn of funding.

UKFI said: "In cash terms, the companies are expected to more than repay the original funding provided by the taxpayer."

November's sale of Northern Rock's retail savings and mortgage business attracted criticism at the time for leaving taxpayers with a potential £400m shortfall.

But UKFI's report into the sale found the deal to be higher in value than all other ways of returning the business to the private sector.

Corporate advisers from Deutsche Bank also considered that delaying the sale by a year to 2013 - the deadline for the disposal to take place - would generate around a quarter less than the Virgin Money offer.