Northern Rock boss confirms sale talks

Feb 22 2010 By Andrew Hebden, The Journal

THE chief executive of Northern Rock has revealed "informal discussions" are under way with possible buyers as the bank moves closer to a return to private ownership.

In an exclusive interview with The Journal, Gary Hoffman said the recent split of the original bank into two separate companies effectively ensured its survival.

And he suggested the process of stabilising, rebuilding and ultimately selling the bank was ahead of schedule, admitting he was pleasantly surprised at the rate of progress over the past 12 months.

Mr Hoffman, who ended a highly successful 27-year association with Barclays to join Northern Rock in October 2008, refused to put a timescale on a sale of the Newcastle-based bank.

However, he said the lifting of the Government guarantee on deposits in the Rock, which could happen within days, would be the last major hurdle to be overcome before one could take place.

"We are not in any rush," said Mr Hoffman, "the Government has set me no deadline.

"We have created a bank that is small but perfectly formed, Northern Rock plc. The next big step is to release the retail deposit guarantee and we will do that quite soon.

"There are informal discussions with potential buyers, but there is no formal process, no timetable, no rush. However, I’m confident that the Northern Rock business will be attractive to private owners in due course." In his first in-depth interview since taking up the role, Mr Hoffman admits to feeling at times Northern Rock would not survive.

"I’ve always thought that we had the people, the attitude and the vision to pull through, but were there times in the depths of the banking crisis that it wasn’t clear whether lots of banks would survive including Northern Rock?

"Absolutely. There were times during my time here that I thought Northern Rock might not survive."

Although he stressed he was confident a deal would be struck with a private buyer, he admitted there was no certainty the Northern Rock brand would live on.

Asked if the name will be retained under new ownership, Mr Hoffman said: "I hope it does and it deserves to, because I think there’s lots of strength in the Northern Rock brand, regionally and nationally. But it depends who buys it."

He would not be drawn on the identities of potential suitors, speculated to include retail giant Tesco and Richard Branson’s Virgin Bank.

He said he would play an active role in the sale process but insisted the Government – the bank’s sole shareholder – would have the final say.

The chief executive also stressed the significance of the lifting of the 100% deposit guarantee, which was introduced following the Rock’s nationalisation. The move prompted a rush of people depositing cash in the bank because it was seen as a safe haven at the height of the banking crisis.

Mr Hoffman said its removal, which is not expected to trigger a larger migration of funds out of the bank, would prove that confidence in the institution has now been restored. It could happen as early as this week.

"The significance of it when it happens is that it is a further demonstration of Northern Rock’s resilience that we have got ourselves into a position where we are very well capitalised, very liquid, that our customers’ savings will be safe with us without the guarantee," he said.

"I think it should be seen as a sign of strength that we are able to release the guarantee at some stage."