WHEN he announced the nationalisation of the Northern Rock in 2008, the then-Chancellor Alistair Darling promised the stricken bank would be returned to the private sector as soon as possible.
George Osborne has decided that time has arrived.
He has put the bank up for sale on the advice of UK Financial Investments, which oversees taxpayer investments in bailed-out banks.
It has concluded that a sale – and not a stock market flotation – offers the best prospect of making a reasonable return on the Government’s £1.4bn investment. So the “good” part of Northern Rock will be sold off.
The sale is likely to raise around £1bn, slightly less than the Rock’s £1.2bn equity capital because a new owner will need to reorganise the business before it can turn a profit.
However, the Government will retain £44bn-worth of long-standing Northern Rock mortgages. Last year these mortgages generated a profit of £400m.
There will be no shortage of prospective buyers for the Rock. We hope the eventual winner will not swallow the branch network or allow the name to disappear.
Indeed, the disposal – and the eventual sell-off of the country’s other state-owned bank, the RBS – presents the Government with a rare opportunity to create more competition in the banking sector.
It will also send an important signal that Britain’s banking industry is finally on the road to recovery.
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