Bloomberg News

U.K. to Put Northern Rock Up for Sale, Osborne Will Say

June 15, 2011

(Updates with comment from Osborne in second paragraph, Darling in fifth.)

June 15 (Bloomberg) -- Northern Rock Plc, nationalized in 2008 after suffering the first run on a British bank in more than a century, will be put up for sale, Chancellor of the Exchequer George Osborne will say today.

“Images of the queues outside Northern Rock branches were a symbol of all that went wrong, and its chaotic collapse did great damage to Britain’s international reputation,” Osborne will say in his annual speech to financiers in London tonight, according to extracts released by his office. The sale “would be a very important first step in getting the British taxpayer out of the business of owning banks -- and a sign of confidence in the industry.”

The bidding process will be open to anyone including mutual lenders and the government wants the sale to spur competition in the banking industry, Osborne will say in his Mansion House address.

Savers queued outside branches of the bank in September 2007 after it approached the Bank of England for emergency funding. Then Chancellor Alistair Darling took the bank into public ownership in February 2008 after failing to find a buyer.

“I was always clear that at the end of the day the taxpayer had to get its money back,” Darling told BBC Television today. “We’ve got to make sure that happens.”

Losses

The government separated Northern Rock Plc, the consumer bank, from Northern Rock (Asset Management) Plc, which is closed to new customers, in January 2010. Northern Rock Plc and U.K. Financial Investments, which manages the government’s bank stakes, hired Deutsche Bank AG in March to advise on the lender’s options including a possible sale.

Newcastle-based Northern Rock posted an underlying pretax loss of 232.4 million pounds ($377 million) in 2010.

Osborne said in March the Treasury is still “some way off” selling its stakes in Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc. The banks required a 65.8 billion- pound government rescue after the collapse of Lehman Brothers Holdings Inc. roiled financial markets worldwide.

--Editors: Andrew Atkinson, Eddie Buckle

To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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