Savers flock back to Northern Rock

Feb 18 2009 by William Green, The Journal

SAVERS are flocking to Northern Rock as the bank continues its recovery a year after being nationalised amid gloomy economic conditions.

The North East based bank almost collapsed after suffering a consumer run in 2007, when long queues formed around branches, but the situation has been transformed.

The latest available figures show the bank held £17.2bn in retail deposits at the end of September 2008, an increase of £3bn since the end of June and £6.7bn from the end of 2007.

The turnaround is impressive given the Rock has to operate within strict competition rules. State aid has been slashed – a key goal of the firm’s business plan agreed with ministers – resulting in most staff getting a bonus.

But despite encouraging figures from the year, the bank said there was still work to do. A Northern Rock spokesman said: “We have made very good progress but conditions are difficult.”

The outstanding loan from taxpayers stood at £11.5bn at the end of September 2008 in contrast to £17.5bn last June and £26.9bn in December 2007.

Details of any bonuses for the bank’s bosses will be disclosed in its upcoming annual report, although senior staff are subject to “more stringent” performance conditions.

But the Government’s requirement for rapid repayment has come at a price with the Rock forced to slash its mortgage book and scrap 1,300 staff.

The Rock spokesman said: “We had 777,000 mortgage accounts at the end of 2007, which had fallen to 662,000 at the end of June 2008 and had fallen below 600,000 at the end of 2008.

“Total lending balances reduced from £98bn at 31 December 2007 to £84bn at 30 June 2008. Of this, mortgage balances reduced from £91bn to £77bn over the same period.”

He said the company’s workforce had fallen from around 6,000 to 4,500, with jobs lost through 1,300 redundancies – 500 of which were voluntary – and natural turnover.