The Co-operative Bank and Northern Rock have cancelled their credit card tie-up, leaving the stricken bank without a card offering for customers.
Northern Rock stopped selling the Co-op's credit cards under its own brand in November, two months after the mortgage lender was forced to go to the Bank of England for emergency funding. Both banks said that the timing was coincidental and that the decision was made before the Northern Rock crisis.
Northern Rock sold its credit card business to the Co-op Bank in 2003 for a profit of more than £7m to free capital for its rapid growth in mortgage lending. Under the terms of the deal, Northern Rock continued to sell credit cards under its own brand that were produced by the Co-op Bank. The banks said the arrangement was for five years and that they made a mutual decision last year that it was in both their interests to scrap the tie-up. Northern Rock said the end of the arrangement was a natural step and that the deal with the Co-op Bank had been put in place for "continuity". The Co-op said it was concentrating on its own-branded cards.
The Co-op Bank said: "With effect from 30 Nov-ember 2007, the Co-operative Bank ceased to offer its Northern Rock branded credit cards to new customers. Existing customers were not affected and continue on their existing terms and conditions as normal. This decision was not a result of any liquidity iss-ues surrounding Northern Rock."
The card business had 90,000 customers and £217m of outstanding balances when it was sold. The move surprised some people at the time because the Co-op was a small player in the credit card market and monoline issuers such as MBNA and Capital One had been active in mopping up portfolios that were not wanted.
Virgin, which is competing with the bank's own management for government approval to run North-ern Rock, says one of the advantages of its proposal is that it can quickly add products such as credit cards. Virgin's credit card is manufactured by Bank of America.
Northern Rock's shares fell 1 per cent yesterday. RAB Capital, the bank's second-biggest shareholder, increased its stake to 8.13 per cent. RAB backs the management proposal and opposes Virgin's bid.Reuse content