New jobs hope for Rock staff

May 21 2008 by William Green, The Journal

THE prospect of threatened Northern Rock jobs being saved was held out by bank boss Ron Sandler yesterday.

During an appearance before the Commons Treasury Select Committee, executive chairman Ron Sandler told MPs that the Rock was exploring how another bank might use its “extremely capable” administration staff, but could not be precise on details amid ongoing talks with unions.

“It would be my expectation that something like 2,000 jobs will go from the bank between now and 2011, with the bulk of those taking place later this year.

“And they would largely take place in our processing activities, which are located up in the North East, both in Gosforth and in Doxford,” said Mr Sandler.

But he added: “If we can find an alternative lender who has an interest in employing some of our capability, for example to lend or process mortgages for that bank’s book, then that would assist in mitigating some of the job losses that we are anticipating.

“And it would also be a productive use of what is an efficient processing capability,” said Mr Sandler, under questioning from Newcastle Central MP Jim Cousins.

He promised to treat staff facing redundancy as “generously and fairly” as possible, but could not give any commitments.

Mr Sandler also revealed a new company-wide incentive scheme is being developed to help reach key targets of repaying a £24bn taxpayer loan, returning the firm to the private sector and releasing Government guarantees to depositors.

Also in yesterday’s session, Mr Sandler signalled that the bank may have to delay fully repaying the taxpayer loan if house prices slide. The warning comes after Housing Minister Caroline Flint warned the Cabinet that “at best” prices are set to fall by 5%-10% – an assessment that emerged last week when she exposed a sheet of typed notes to photographers.

Mr Sandler yesterday said the Rock’s business plan was deliverable, with money due to be repaid before the end of 2010.

“There is no question that if house prices were to decline seriously, five, 10, 15%, it would certainly put a great deal of stress on our ability to deliver the plan.

“But I can’t give you a single figure of house prices decline to cause the plan to fall over,” he added.

Stress testing showed the bank had a “robust” plan able to withstand a 1990s-style housing crash, added Mr Sandler.

He acknowledged there was an “adverse risk” of the Rock being left with more risky mortgages as it encouraged customers to move to other banks as it switched to a more sustainable footing.

Rock chief financial officer Ann Godbehere told MPs that the loan had already been cut from £26.9bn, with another quarter due to repaid by the end of 2008. She added testing the business plan against the 1992 recession showed a six-month delay in repaying the loan, although Government guarantees protecting payments of depositors would have to remain beyond a planned 2011 cut-off.

Bowled out

MR Sandler said yesterday that the sponsorship of Durham County Cricket Club would end, but refused to speculate about what would happen when the sponsorship deals for Newcastle’s football and rugby teams expire in two years.

Mr Sandler said: "We have chosen to continue the sponsorship of Newcastle United and Newcastle Falcons, partly because of commitments that we have entered into there – sometimes sponsorships continue until they come to a contractual end – and partly because I believe it is in the commercial interest of the bank that we should continue with those."

Strong roots

MAINTAINING Northern Rock’s links with the North East is crucial to its future.

Ron Sandler said regional support was an "important source of strength" and retaining this was key to achieving its recovery plan. "I have taken the view very strongly that our ability to achieve the objectives of the plan will be considerably enhanced if we can retain the close linkages that the bank has with the region," he said.

"I think it is essential that we should continue to view ourselves as a principal employer in the North East and that we retain from the employment perspective, the roots and connections with the region," he said.