Newspaper article The Journal (Newcastle, England)

Remutualisation of Bank Not Ruled out; Taxpayers Will Be 'Rewarded' for Bail-Out

Newspaper article The Journal (Newcastle, England)

Remutualisation of Bank Not Ruled out; Taxpayers Will Be 'Rewarded' for Bail-Out

Article excerpt

Byline: Karen Dent

NORTHERN Rock says it expects to be back in the black next year after cutting its losses by half over the last year to pounds 78m as the state-owned bank heads for a sale back into the private sector. But although bids were placed last week for the Newcastle-based bank - with Virgin Money and US investment fund JC Flowers believed to be in the running - the company has still refused to rule out remutualisation.

And chairman Ron Sandler yesterday declined to direct the growing speculation on the bank's future, insisting it would examine the bids, act in the best interests of the taxpayer and "had not ruled anything in or out".

"I'm not in a position to go into specific detail about the process or talk about any specific parties," he said.

He said the business would be returned to the private sector "at the right time". It is thought unlikely that it will raise the pounds 1.4bn that taxpayers put up to rescue the bank, but Mr Sandler insisted taxpayers would eventually be "well rewarded" for bailing out the bank.

Northern Rock plc - which was split from the "bad bank" Northern Rock Asset Management (NRAM) last year - said it expects to carry a loss for the rest of the year but turn a profit in the second half of 2012.

Mr Sandler said: "The trading environment remains challenging and there is strong competition in the savings and mortgage markets. We have not previously made any public announcement about the timing of a return to profitability. "At some point in the second half we'd expect the bank to be trading profitably on a consistent basis. But I am not forecasting specifically that we will post a profit in the second half."

The bank is continuing to cut costs and is halfway through plans to axe 680 jobs it announced in March, which would take its workforce to 2,000 by the end of this year. Mr Sandler said there were no current plans to cut more jobs but added: "We have certainly not ruled out further job cuts. Going forward beyond the end of the year, we will continue to look at how we can align the cost base to the size of the bank. The long-term future of Northern Rock does depend on delivering a level of efficiency. …

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