Rock boss’s upbeat vision of the future
Aug 6 2008 by Adrian Pearson, The Journal
THE man responsible for rebuilding Northern Rock has said the bank can win back savers’ confidence despite announcing losses of more than half a billion pounds.
Executive chairman Ron Sandler gave the upbeat assessment of the bank’s current health and likely future as the lender unveiled half-year losses of £585.4m.
The loss comes alongside figures revealing an increase in the number of Rock customers defaulting on their mortgage, with its repossessions jumping from 2,215 at the start of the year to 3,710 at the end of June.
Despite the losses, which include £130m spent on restructuring the business after it was nationalised in February, the bank has managed to repay £9.4bn of its Bank of England loan, taking the amount owed at the end of June down to £17.5bn.
The bank has also secured an extra £3bn of investment from the Government after converting outstanding debt into equity, a deal in which the Treasury will convert some of the money owed into shares.
Both the Conservatives and the Liberal Democrats last night accused the Government of putting the taxpayer at even greater risk following the latest bank handout.
Rock boss Ron Sandler said the losses were not unpredictable given the current downturn in global credit markets, and insisted that the bank’s long-term plans included models for a drop in house prices and continuing credit crunch. He said the bank was still on track to be returned to the private sector in 2011, having repaid the loans, and was confident it would be an attractive buy for many investors
“It is a brand that is hopefully on a path to recovery. We are certainly seeing that retail deposits are returning to the bank and we are able to enter wholesale markets and attract a very high calibre of executives,” he said.
“And we are able to lend money. Not in large amounts – we are being very cautious about the quality of the lending – but nonetheless we are lending.
“I believe that here in the North East there is strong regional support for the bank. There is much to be done before we return the bank to private ownership but I belive we are moving forward comfortably.”
Asked if there were any further job losses planned should the economy continue with its current slump, Mr Sandler said he could never rule anything out but believed the company restructuring process had identified an appropriate number of redundancies.
The bank announced last week that 1,300 jobs are to go, including 800 compulsory redundancies.
Mr Sandler said: “When we get through the present consultations by the end of August, we will move quite quickly to the sort of size we have desired.”
On possible legal action against former Rock boss Adam Applegarth Mr Sandler would only say that the investigation was ongoing and that a decision was expected soon.
The Rock by numbers
:: NORTHERN Rock’s repossession total rose by two-thirds from 2,215 at the start of the year to 3,710 during the first half of this year
:: Its bad debts provision stands at £351.8m as 1.18% of its mortgage book – 7,796 homeowners – slipped to more than three months in arrears at June 30, more than double the amount at the end of 2007
:: The size of its residential mortgage book fell by £13.4bn to £77.4bn in the past six months
:: Borrowing provided by the Bank of England has reduced by £9.4bn to £17.5bn from £26.9bn at the end of December 2007
:: The lender also said it was increasing staff numbers in debt management from 185 to about 500
:: The total savings balances of £14.2bn revealed yesterday are more than £10bn below a year earlier, but are £3.7bn ahead of the end of 2007
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