Virgin Money woos Sanderson over 'good bank'

Virgin Money is holding talks with former Northern Rock chairman Bryan Sanderson with a view to him joining the board of its new bank ahead of a possible bid for Northern Rock’s “good bank”. Discussions are understood to have been held, although there are still issues to be hammered out such as fee and role.

Virgin has applied for a banking license and the appointment would be extremely useful to the company given that Mr Sanderson was parachuted in to find some sort of future for the company after replacing the hapless Matt Ridley who was forced to resign as the company spiralled into crisis.

Mr Sanderson, a former chairman of Standard Chartered, also has sold North Eastern credentials, hailing from County Durham. He left the bank after Ron Sandler was made executive chairman by the Government when it took control.

Northern Rock yesterday made the second cut to its mortgage rates in a month, reducing selected products by 0.64 per cent.

The state owned bank is expected to receive EC approval for its split into two banks – Northern Rock PLC, popularly known as the “good bank” and Northern Rock Asset Management, the “bad bank” – next week.

The good bank is seen as a candidate for a possible pre election sale, raising cash for the exchequer and allowing the Government to show it has started to make a return from the more than £1 trillion of tax-payers cash that it has pumped into the banking system.

However, a sale comes with political pitfalls with worried Labour MPs wanting to see evidence that jobs will be retained in the North-East. At the same time a sale to an existing operator, further consolidating banking in the UK and reducing competition, would also be likely to attract strong criticism.

That would make a new entrant such as Virgin a strong candidate, along with Tesco which also has ambitions in banking. Banco Santander could also be a candidate because it would gain scale from a deal by combining Northern Rock with Abbey, Alliance & Leicester, and Bradford & Bingley. However, such a deal would politically harder to accomplish.