Northern Rock pours cold water on bid rumours

Northern Rock yesterday poured cold water on the persistent takeover rumours which have buoyed up its share price since flotation last October. But, as Lea Paterson reports, a takeover of the former building society is not completely out of the question, as long as the price is right.

"Why the hell would we want to sell up?" asked Bob Bennett, Northern Rock's finance director. According to Mr Bennett, no one can run Northern Rock better than Northern Rock itself, a fact that, in his view, serves to deter would-be buyers.

But Mr Bennett admitted the bank would consider offers that valued the company at a significant premium to its current share price. "I just can't see that people would be willing to pay that premium," he said.

Takeover rumours have swirled around Northern Rock since flotation last October, helping its share price to surge by almost a third. Most recently, the company has been linked with Lloyds TSB, a rumour denied by Mr Bennett yesterday.

He said: "We have no wish to be taken over - we think we're a good operation with a good management.... We've have had no official or unofficial approaches."

Analysts said yesterday that, even at current prices, Northern Rock still remained a likely takeover target. One said: "It's a good little business. It would fit well with a larger UK or European bank which wants to strengthen its position in the UK mortgage sector."

Northern Rock yesterday unveiled its first set of figures since flotation on 1 October. Profits rose by almost a fifth to pounds 200m. Leo Finn, chief executive, said: "The process of conversion ... did not deter us from achieving our challenging business targets."

The former building society also announced yesterday that, by the end of this quarter, it will have closed 25 branches since the beginning of September, mostly in the North of England. Northern Rock was keen to stress the branch closure programme was not sparked by demutualisation, but by a long-running strategy of cost reduction. But it admitted flotation speeded up the closure process.

Mr Bennett said: "I don't think we'd have done it at the pace we did. But we would have done it." He added the bank did not anticipate further branch closures "for the time being".

In common with many banks, Northern Rock is trying to save costs by reducing the number of transactions carried out in branches. Customers are being encouraged to carry out transactions by telephone, while branches are being primarily used for the sale of new products.

The trend towards centralisation is not welcomed by all Northern Rock customers. "If you're going to close a branch, you're going to upset some people," Mr Bennett admitted.

The bank was relatively upbeat yesterday about prospects for the mortgage lending sector. Last year, it had a 7.5 per cent share of the net lending market.