In an effort to recoup more lost taxpayer investment, the defunct side of Northern Rock bank is merging with Bradford and Bingley. The new company will be called UK Asset Resolution (UKAR) and could possibly team up with the good side of Northern Rock to be sold in the future.
Bradford and Bingley became a nationalized bank in 2008, but its savings arm was sold to the Spanish Santander. Northern Rock, which was also absorbed by the government in 2008, was split into a good and bad bank last year. The bad side became Northern Rock Asset Management (NRAM).
NRAM claims it has paid back one billion of the 24 billion taxpayer loan so far this year. This represents an increase of the 300 million it announced in August it had repaid for the first six months of the year.
Gary Hoffman, Northern Rock’s chief executive, is now stopping down.
Hoffman commented on his confidence in the new company, saying: “This integrated structure, with NRAM and Bradford & Bingley under common management and governance, creates the opportunity to deliver maximum value for the taxpayer and is therefore the right strategy. I wish the new board well for the future.”
He disputes the notion that Northern Rock has a bad bank side currently. Believing instead that, the so called good side of Northern Rock continues to sell mortgages that are compiling losses. The bad side has beaten many expectations, already returning to profitability within the first half of the year.
UK Financial Investments owns the taxpayers’ stakes in the bailed out banks, and believes in the new structure as one that can help increase returns to taxpayers.