Why the future for the Rock may be good and bad

Jun 11 2009 by Peter McCusker, The Journal

NORTHERN Rock is set to be split into two divisions by the Government, heightening job fears surrounding a possible sale of the bank.

The Unite union last night expressed concerns for the job security of the 4,500 staff at the nationalised Newcastle business over the split into what it called a “good bank” and a “bad bank”.

And one banking analyst suggested the moves herald the demise of the Newcastle lender which has seen its fortunes recover strongly in recent months.

Last night, both the Treasury and the bank stressed that no final decisions had been made on its future.

But John Shipley, Liberal Democrat leader of Newcastle City Council, warned that whatever changes are made to the Rock’s ownership, jobs must be protected and its regional links preserved.

He said: “Nationalisation was never seen as a long-term solution.

“But if there is to be a change in the status of Northern Rock, it is just vital that the headquarters function is maintained in the North East of England and jobs protected.”

Sir Jeremy Beecham, a senior Labour Party member and city councillor, added: “I always voted against demutalisation. So if it is going to come out of state control, I would be happiest to see it as a mutual and restrict itself to lending for house purchases and not speculative commercial deals.”

He added: “I would hope the Government would lay some down rules rather than just selling to the highest bidder.”

Within the next few weeks the European Commission (EC) will give a decision on a Treasury proposal to split Northern Rock in two.

One division which is already being referred to as the “good bank” includes its 50-strong branch network and its retail deposits of almost £20bn.

The other division will comprise its residential mortgages and wholesale lending and analysts say this business is likely to be worth far less than the £100bn at which the bank has valued it.