View from City Road: Selling loans gives FNFC a breather

Repackaging bank loans as bonds and selling them to investors has been a helpful way for large banks to get rid of old loans and make way for new ones. In the case of First National Finance Corporation, the consumer credit group, it has proved extremely useful for getting the banks off its back in the wake of a financial reconstruction last year. Total debt has been tumbling as consumer credit loans have been sold off.

Bank loans have fallen from pounds 1.38bn in October 1991 to pounds 1.25bn a year later and pounds 910m last October, with further falls in prospect as more securitisations come through, at the rate of about three chunks a year. Gearing has fallen from 9.5 to 6.1 over 12 months.

George Cracknell, FNFC's new executive deputy chairman, must be feeling particularly pleased to see bank debt tumble. He was Barclays' supremo on financial reconstructions until last year, but is now on the receiving end of his old bank's attentions.