Sky News business editor Michael Wilson

Curiouser and curiouser. What will Northern Rock be by the time it's broken even in 2011?

The bank's announced its £168m losses, more or less as expected; it promises the government/taxpayer will get its money back by 2010, which is a slight improvement on executive chairman Ron Sandler's forecast earlier this month, and its mortgage book has half the industry's average bad debt figure.

So the Rock's future looks slightly brighter, but the remaining 4000 staff will still be wondering what kind of company they'll be working for.

Instead of the aggressive minnow which became the investor's darling only a year ago, it's now going to have to deliberately downplay its considerable government-backed advantage.

Ironically, the Rock is about the best place for a deposit account at the moment, but because it is in receipt of state aid, the bank has had to commit itself to a 'Competitive Framework' to try to convince its rivals that its not competing on an unfair basis.

So, Northern Rock may not become a 'market leader' in any 'product category', like mortgages, for example, and must effectively reduce its market share.

Must be a joy to work in that atmosphere. Somehow I don't see how the Rock's previous roustabout up-and-at-'em character will adapt to a more sober, second class existence.

And there are two much more serious issues which are still unresolved. We still don't know the full extent of the credit crunch and what it will do to the lending market, so much could go wrong with people's ability to repay their borrowing in the eighteen months until Ron Sandler's promised £24bn payback date.

Equally serious is the as yet unsettled issue of the European competition authorities attitude to Northern Rock's state-aid advantage, not to mention the rival UK banks and building societies who have been concerned about the high rates offered by the bank.

Taxpayers still need to ask themselves whether or not £24bn is the right price to pay for a job creation scheme with an uncertain future.

Comments

[Dennis, Cramlington Northumberland 1 Apr 2008 12:00:02]

To Peter Fordham, Spain

The company was not 'bust'.

Believe the Government 'spin' and cover-up (and the press hysteria) if you wish.

Only the gullible do.

[Peter Fordham, Spain 1 Apr 2008 08:19:33]

Why are the shareholders or the management getting anything ??? the company was bust. Protect the customers and prevent mass unemployment among the workers, that makes sense but to give one man £1M of tax payers money is simply corrupt.

[Elizabeth Davies Cape Town 31 Mar 2008 15:26:03]

Northern Rock or should it be Northern Shock. Guess what all the top bods made money out of it, and Joe public will carry the can...typical!

[Dennis, Cramlington Northumberland 31 Mar 2008 13:32:37]

Governments used to 'spinning' will find it hard not to keep up the shoddy practice when, 'creative accounting' fully explored no doubt, they announce the very depressing picture just as a law suit pending trying to establish a fair compensation for shareholders...

I am not suggesting anything along the lines of a Mugabe here, but, well, do you trust this Government, on anything?

Thanks for the report, Michael, but I regret I am no wiser as to what write-offs against profit have been shown, what high penal interest rate - taking worth out of the business - charged by this Government, is currently winging its way back to, oops, the Government itself.

And, whether trading at 'lesser rates' to keep within the 'Competitive Framework' is good for the promised speedy recovery I very much doubt...

But not to worry, no doubt there will be some large provisions for 'restructuring' costs, to try to force the shareholder settlement down, and then, when all is done and dusted, those over zealous reserves will re-appear fresh from the bath water, to serve some future friend of the City well.

Can you give us any more facts, please, Michael?

This run down amounts to asset stripping; no less.
Shameful.

Dennis
Cramlington
Northumberland

[Khalid 31 Mar 2008 12:15:15]

Sir
Any loss encountered by corproates is indeed a bleak scenario, however, with the added 24Bn, I'm sure amany an anxiety attack may well be justified.
As the rock has a healthy arrears ledger thus far as many a mortage, naturally, lesson will and should be learnt form prior business practices, whilst a closer eye upon world markets remains the order of the day.
So, in order to avoid any further [Jitter Bug]s I' suppose time will indeed be of essence, whilst underlying developments make the Nortern Rock a prosperous entity. {Cab Calloway]