'Let's use the Rock to save post offices'

Jul 6 2009 The Journal

Mortgages return as lending is increased

NORTHERN Rock is again offering mortgages to its existing customers as speculation mounts that the Government is planning an early sell-off of the nationalised bank.

The list of potential bidders for the Newcastle-based bank is growing as the Government awaits approval from the European Commission to divide the Rock into "good" and "bad" banks.

The "good bank", known as BankCo, would comprise its 50 branches, retail deposits and some of the stronger mortgage assets. The "bad" bank is known as AssetCo.

BankCo’s retail deposits of £19.5bn would make it an attractive proposition for bidders and it is expected to have a £5bn price tag if the split is approved.

Northern Rock said it was offering mortgages to current customers for the first time since nationalisation in early 2008 as part of a move to boost lending. A Rock spokeswoman said: "Part of our business plan is to start increasing new lending and this is part of it. We are going to start increasing the competitiveness of our products."

Supermarket giant Tesco and Virgin tycoon Sir Richard Branson have both already been linked with a bid for the Rock.

Now reports suggest that billionaire US financier Wilbur Ross may team up with Sir Richard to table a joint bid. Private equity group Pamplona Capital, which was founded by Russian oligarch Alex Knaster, has also been suggested as a possible contender.

The Rock’s collapse in September 2007 is widely considered as the catalyst for the credit crunch.