Northern Rock sale to come up £400m short

Ron Sandler, the chairman of Northern Rock, urged taxpayers to look at the bigger picture yesterday as it became increasingly apparent that, when it is sold, the nationalised lender will fetch far less than the £1.4bn of government capital injected into it.

As Northern Rock revealed that its equity value has slumped to £1.12bn, Mr Sandler stressed that the capital injection was only part of a broader £27bn government rescue package and said he expected taxpayers would eventually get back at least as much as they put in.

Speaking as Northern Rock announced first-half pre-tax losses of £68.5m, Mr Sandler said: "If I'm a taxpayer and I'm asking the question 'was the support appropriately rewarded', it is the bigger question I would ask you to focus on – I am confident the taxpayer will be well rewarded."

The taxpayer lent Northern Rock £27bn during the banking crisis of 2008. Last year, the group was split into a "good bank" – the main business, known as Northern Rock – and a "bad" bank, which was named Northern Rock Asset Management (NRAM) and controls the worst mortgages. After the split, £1.4bn of the original loan was allocated to Northern Rock, where it was turned into equity, while the remaining £25.6bn was used to support NRAM.

Mr Sandler's comments came after Sir Richard Branson's Virgin Money and JC Flowers, the US private equity firm, separately tabled preliminary offers for Northern Rock last week that are understood to be pitched at between £900m and £1bn.

He wouldn't say when he expected to complete a sale of the group, or at what price. But Mr Sandler said he was "pleased with the level of interest we have received and will continue to explore the sale option over the coming months... at the right time and in the best interests of taxpayers".

Northern Rock, which was boosted in the first half by a 64 per cent reduction in costs to £106.8m, said it expected to begin trading profitably in the second half of 2012. The bank said conditions remained difficult and competition was strong in the mortgage and savings markets. However, it is confident it can continue to improve its bottom line, in large part by continuing to reduce its costs.

The bank announced 680 job cuts earlier this year, which began taking effect last month. Its costs were significantly reduced in the first half after Northern Rock was operationally separated from NRAM in November 2010. Before then, Northern Rock had borne the costs of running NRAM even though the two units were formally created at the end of 2009.

Last week, NRAM reported a £344.1m pre-tax profit as low interest rates kept mortgage repayments affordable for borrowers. Combined with the Northern Rock result, the two businesses reported a first half pre-tax profit of £275.6m, compared to £27.3m a year ago.

Start your day with The Independent, sign up for daily news emails
News
newsAnother week, another dress controversy on the internet
Life and Style
Scientist have developed a test which predicts whether you'll live for another ten years
health
Life and Style
Marie had fake ID, in the name of Johanna Koch, after she evaded capture by the Nazis in wartime Berlin
historyOne woman's secret life as a Jew in wartime Berlin
News
news... and what your reaction to the creatures above says about you
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn