Newspaper article The Journal (Newcastle, England)

Tesco Linked to Possible Northern Rock Takeover

Newspaper article The Journal (Newcastle, England)

Tesco Linked to Possible Northern Rock Takeover

Article excerpt

Byline: Peter McCusker

SPECULATION that Northern Rock will prove attractive to potential purchasers has been further fuelled after Tesco became the latest name to be linked with a bid for its "good" assets.

Financial experts expect the part of the nationalised Newcastle company's business known as the "good" bank - comprising its 50 branches, retail deposits and some of its stronger mortgage assets - to be sold for up to pounds 5bn if the European Commission allows it to be split in two.

First Virgin and now Tesco have been linked with a bid for the bank, and the "good" part of the Rock may also attract interest from UK and international banks.

Continued speculation on the Rock's future followed yesterday's announcement that the Financial Services Authority has agreed to let it continue to breach capital reserve requirements until an EC decision is made on its restructuring.

Northern Rock and the Treasury have outlined a future for the Northern Rock which would see the business split into two separate businesses.

They are now waiting for a decision from the EC and, if approved, the Government will give the Rock a further pounds 3bn, with it then being divided into a good bank, to be known as BankCo, and a bad bank, to be known as AssetCo . Mike Trippit, a banking analyst with City-based Oriel Securities, said: "With retail deposits of pounds 19.5bn it will be of great interest to many banks.

"At the end of the day, it will all come down to price, but the importance of retail deposits cannot be underestimated at the moment as banks look to build up their reserves."

Leigh Goodwin, of City banking analysts Fox-Pitt, Kelton, believes that the branch network will prove popular to other financial institutions and could fetch as much as pounds 5bn, in much the same way that Santander snapped up parts of the Bradford & Bingley, including its 200 branches. …

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