The FD Interview: Philip McLelland

Eminently less Googleable than Justin Bieber’s haircut or Stephen Hester’s wages, the fortunes of a business you may never have heard of should attract more attention than they do. UK Asset Resolution (UKAR) is less than a year old, created last October when the Treasury bashed together the nationalised mortgage books of Northern Rock Asset Management (NRAM) and Bradford & Bingley (B&B), deemed toxic and good only for winding down. Its mandate is to repay the UK taxpayer for bailing out banks and mortgage lenders in the crash of 2008.

And of the bailed out entities, it is closest to doing so: its maiden set of financial figures this April reported swinging from a loss of £258m to a healthy profit of £401m. Many were surprised that the ‘bad bank’ turned a profit, but almost 90 percent of the mortgages it houses are being repaid in full every month.

“Those mortgages will continue to pay every month. It’s not difficult to see there’s profit to be made,” Philip McLelland, finance director of UKAR, tells Financial Director. “Part of that is because we have government funding on the balance sheet and the rates on it are lower than if you went into the markets. But that’s the set of cards we have been dealt.”

And what seemed like a poor hand has been played well in comparison with its bailout peers (though UKAR is not a bailed-out entity in itself). Lloyds, Royal Bank of Scotland (RBS) and Northern Rock – the latter of which is labelled the ‘good bank’ and not part of UKAR – are currently loss-making. UKAR is not under the same commercial pressure as they are, but McLelland says that its focus on sound management of its assets, with a view to selling them on in time, is just as crucial. He has a quiet chortle at the mention of the ‘toxic’ label given to the assets that UKAR manages.

“We don’t talk about bad banks and good banks here. That was invented by the media,” he says. “We talk about the business we have to get on with, maximising the opportunity for the taxpayer. It may take a long time – generations – but if we govern this business well, taxpayers will get their money back.”