Northern Rock has signed a deal with Lloyds TSB, allowing its rival to cherry-pick its best fixed-rate customers so that the nationalised bank can shrink its mortgage book and repay the Bank of England's loan.
Northern Rock will write to eligible customers before their fixed deals end offering a "streamlined" service for applying to Lloyds. The service starts next month, and will save the jobs of about 100 Northern Rock staff who would have been included in the bank's 2,000 job cuts.
Lloyds nearly bought Northern Rock just before its near-implosion in September, and now has the chance to pick off business from 180,000 customers over the next three years. Lloyds will consider customers with a loan to value of about 80 per cent through the service, but said customers with higher LTVs could apply through its branches.
Northern Rock has lent up to 125 per cent of a property's value through its now defunct "Together" mortgage. Ron Sandler, the bank's executive chairman, has acknowledged that "adverse selection" could leave Northern Rock with riskier customers because other lenders will be unwilling to take them on.
Customers can choose to go with Lloyds, stay with Northern Rock on its standard variable rate, or look elsewhere. Lloyds will pay Northern Rock a brokerage fee for new business.
The Government has advertised for an independent valuer for Northern Rock four months after the bank was nationalised, warning applicants to be ready for examination in a tribunal and scrutiny from former shareholders and the public.
If anyone affected by the valuation objects to the decision, they can refer it to the Financial Services and Markets Tribunal, the application document said. The Government may also be required to reveal information about the valuer under the Freedom of Information Act.
The Treasury has struggled to drum up interest in valuing Northern Rock for the purposes of compensating shareholders. The remit requires the valuer to assume that Northern Rock is not a going concern, which the bank's former shareholders argue rigs the process to produce a value of zero.
The Government appeared to tie the valuer's hands further yesterday by allowing access to the bank's current management but not its previous executives.
SRM Global, RAB Capital and the UK Shareholders Association have asked the High Court to review the compensation process. Accountancy sources have said a valuer would want to be indemnified against legal action, but this has not been offered.
The Treasury denied that there was a lack of interest in the job, and said it had spent the time since nationalisation putting the process in place.Reuse content