THE TREASURY yesterday sold £13 billion of Northern Rock mortgages and loans to a New York private equity giant – which immediately sold on £3.3bn of them to Spanish-owned UK challenger bank TSB.
The acquisition of the portfolio by Cerberus is said to be the biggest sale of state-owned assets by any European government.
UK Asset Resolution (UKAR), the “bad bank” created in 2010 to run down the problematic loans in Northern Rock and Bradford & Bingley, said the sale would include mortgages and unsecured loans from the legacy book of Northern Rock Asset Management (NRAM).
UKAR said the deal would let it pay down a further £5.5bn of taxpayer bailout debt incurred when the two former building societies were nationalised in the 2007-8 financial crash.
Chancellor George Osborne said it was now clear taxpayers would receive more money from Northern Rock than they put in, and that it meant the government had now offloaded more than 85 per cent of the assets of the former bank.
He said: “Today marks another major milestone in clearing up the mess left by the financial crisis, with the sale of former Northern Rock mortgages.
“The highly competitive process, unprecedented scale, and the fact that these mortgages have been sold for almost £300 million more than their book value demonstrates the confidence investors have in the UK.”
UKAR chief executive Richard Banks said: “The sale of this loan book is a significant step in accelerating the repayment of our government loans and demonstrates our continuing success in maximising value for taxpayers.”
The sale means UKAR’s total balance sheet has now reduced by £73.5bn, or nearly two-thirds, to £42.3bn.
The group said those mortgage customers affected did not need to do anything as they would be contacted directly to explain the change, and there would be no change to the terms and conditions of the mortgages involved.
As part of the deal, TSB Bank, which was demerged from Lloyds Banking Group in June 2014 and snapped up by Sabadell of Spain earlier this year, becomes the lender to an additional 34,000 UK homeowners.
TSB chief executive Paul Pester said his bank was well-placed to take on the loans as it had one of the highest capital ratios in the industry.
“In addition, they will significantly enhance TSB’s profitability which, in turn, will help us to continue to deliver our growth strategy – helping us to bring more competition to UK banking,” he said.
Northern Rock made global headlines in late summer 2007 when customers queued round the block at branches to remove money when the bank was hit by a liquidity freeze in the financial markets on which it had become almost totally dependent under then-chief executive Adam Applegarth’s expansion strategy.