Northern Rock attractive to potential purchasers
Jul 2 2009 by Peter McCusker, The Journal
Mike Trippit, a banking analyst with City-based Oriel Securities, said: “With retail deposits of £19.5bn it will be of great interest to many banks.
“At the end of the day, it will all come down to price, but the importance of retail deposits cannot be underestimated at the moment as banks look to build up their reserves.”
Leigh Goodwin, of City banking analysts Fox-Pitt, Kelton, believes that the branch network will prove popular to other financial institutions and could fetch as much as £5bn, in much the same way that Santander snapped up parts of the Bradford & Bingley, including its 200 branches.
One analyst dismissed speculation of Tesco’s interest as unlikely, saying the supermarket giant is more interested in giving value to the customers who walk through its doors.
In March, Tesco said it planned to open bank branches in 30 of its stores by the end of this year and if it continued that trend in its 2,200 stores in the UK, it would have little need for Northern Rock’s branch network. A Treasury spokesman added: “Any decision will be taken in the best interests of financial stability and of the taxpayer. Our only focus is our discussions with the European Commission around the restructuring of Northern Rock and the implementation of Northern Rock’s new mortgage lending.”
The Northern Rock said it did not comment on speculation.
No formal offers are expected for the business until the EC decision is made and this is not expected until September at the earliest. But Neelie Kroes, the European Commissioner for Competition, has already expressed concerns the additional £3bn from the UK Government to the Rock breaches EC competition rules.
Northern Rock was the first UK bank victim of the credit crunch and borrowed almost £27bn from the Bank of England before being nationalised in February 2008.
The bank has staged a remarkable recovery since and has paid back more than £18bn of its £28bn Government loan and reduced its mortgage balance to £66.7bn.
It said that its plan to lend up to £14bn in new mortgages by 2011 had seen customers flocking back and that its new lending strategy had given it renewed stability and could even lead to new jobs being created at its Gosforth headquarters in the long term.
With retail deposits of £19.5bn, it will be of great interest to many banks.
