Northern Rock to stay in the North East

Oct 29 2009 By William Green and Adrian Pearson, The Journal

NORTHERN Rock bosses have promised the company's North East roots - its "heart and lungs" - will not be put at risk by plans to split up the bank.

Rock chief executive Gary Hoffman has said he finds it "difficult to see" any situation in which any future bank buyer moves the businesses from its historic Tyneside home.

He was speaking as the European Commission approved plans to split the bank into two, with one section being a general high street lender able to offer new mortgages and savings accounts and the other, Northern Rock (Asset Management) plc, which will exist to service existing mortgages.

Taxpayer support was also extended to £27bn, with an extra £8bn to help the bank offer new mortgages. The bank could still be paying this money back a decade from now, Mr Hoffman said.

Most of the so-called "bad bank’s" assets are in mortgages, and Mr Hoffman said the bank fully expects around 90% of these will be repaid.

The bank boss said he could not say when Government guarantees covering Rock savers would be changed, but insisted the "Northern Rock brand has proved very resilient" and had to look to a future without the bank-specific cover.

Mr Hoffman last night said whoever eventually takes over the bank has to respect its regional roots.

"What is really clear to me is that the heart and lungs of Northern Rock are in the North East. Clearly we are a national brand with great people up and down the country but the heartbeat comes from the North East. I find it difficult to see how it would not continue to be that."

Mr Hoffman has played down calls for the bank to be turned back into a building society.

"I have read calls for re-mutualisation, and I think it would be very difficult to achieve. It is not something the Government has talked to me about.

"Re-mutualisation means giving or selling back to depositors and that would be quite difficult."