Split Bank Before Sale
Friday, June 12, 2009 20:42
According to investment bankers examiming the feasibility of a sale of the Northerrn Rock, it is learnt that the bank should be split into two businesses, with retail deposits in one unit and mortgages in the other.
Under such an arrangement, which is one of a number of options being considered, the Treasury would try to sell the £19.5 billion package of retail deposits separately from the £66.7 billion Northern Rock mortgage book. In this instance, the buyer of the mortgage business would also have to asume the bad loans held by Northen Rock.
It also emerged that there had been tension between the Shareholder Executive, which oversees government-owned businesses such as Royal Mail, and UK Financial Investments, over Rock.
One of the Treasury’s primary concerns over preparing a sale of Northern Rock is what credit rating the lender would attract. For buyers, a key element will be working out whether the bank’s cost of funding would allow them to make profits.
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