Northern Rock back in private sector by Christmas

27 April 2009

Nationalised bank Northern Rock could be back in private hands by Christmas, as the government looks to claw back some of the billions of pounds pumped into the beleaguered banking sector.

Reports in the weekend media suggest that the lender could be split into two in the coming months, a move which could separate its toxic loans from its branch network and £20 billion savings and home loans division.

Advisers at Credit Suisse have already begun drawing up a sales plan, according to The Sunday Times, in which the bank’s “good” assets could fetch £2 billion while the “bad” assets would remain in government hands.

According to the newspaper, the Treasury has been in contact with potential buyers including Richard Branson's Virgin Money, National Australia Bank, which owns Clydesdale Bank and Yorkshire Bank, and Spanish banking group Santander. Private equity groups Blackstone and Towerbrook are also reportedly interested.

Branson made a move to buy up Newcastle-based Northern Rock before it was taken under the government's wing. However, the Newcastle-based bank was eventually nationalized by the Bank of England with £25 billion of taxpayers’ money stumped up to keep it afloat. It has still to repay £9.8 billion.

Some critics have been infuriated by the potential sale, which they claim would leave taxpayers £1.3 billion out of pocket.

A spokesman for hedge fund SRM Global, which owned 11.5% of the bank at the time it was nationalised, told The Telegraph that any price tag settled on now would not reflect Northern Rock's true value. "Following the government's nationalisation of Northern Rock and its decision to run the down the bank's mortgage business, the company bears no resemblance today to what it was before it was nationalised," he said.

Northern Rock says it has no plans to rush back to the private sector. A spokesman says: "Our stated intention is to return to the private sector. The capital and legal restructure will facilitate that and our intention is to complete the restructure in the second half. But there is no timetable set for anything other than when the restructure will complete."

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