Northern Rock sale closer as safety net removed

Feb 25 2010 By Karen Dent, The Journal

The bank said it had written to all its saving customers to inform them about the changes. The Rock was split in two on January 1 ahead of moves to sell the ‘good’ part back to the private sector. City Minister Lord Myners said that removing the 100% guarantee showed how far the bank’s restructuring had progressed.

He said: "Depositors can have confidence in Northern Rock. Our goal is to see the taxpayer get a good return on its investment in the bank and for Northern Rock to focus on providing an excellent service to its customers."

The ‘good’ bank, known as Northern Rock, will be sold off. It holds savings deposits of £19bn, £10bn of quality mortgages and 76 branches. The ‘bad’ Northern Rock Asset Management (NRAM) has £50bn of mortgages and £4.5bn of unsecured loans. It is likely to remain in public ownership and may be merged with the state-owned Bradford & Bingley mortgage book.

The lifting of the guarantee in May is the last major hurdle to be overcome before the sale of the bank. Mr Hoffman told The Journal this week he was in "informal discussions with potential buyers" but had no deadline for a sale and would not comment on the identity of buyers – although speculation has centred on retail giant Tesco and Richard Branson’s Virgin Bank.