Treasury sells £13bn Northern Rock mortgages

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The Treasury today sold £13 billion of Northern Rock mortgages and loans to New York private-equity group Cerberus in the largest sale of state-owned assets by any European government. 

The deal will see UK Asset Resolution pay down a further £5.5 billion of bailout debt. UKAR owns the bad-bank parts of Northern Rock and Bradford & Bingley, both of which were nationalised at the height of the financial crisis. 

Chancellor George Osborne said it was now clear that taxpayers would receive more money from Northern Rock than they put in during the financial crisis.

The taxpayer bailed out the two former building societies for £48.7 billion in 2007 and 2008. After today’s deal completes, £20.1 billion of that will have been repaid. 

Cerberus is paying £280 million over the most recent valuation of the 125,000 mortgages and loans which make up the £13 billion book. It has immediately sold on £3.3 billion of the loans, held by 34,000 customers, to TSB. 

Osborne 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 demonstrate the confidence investors have in the UK, which has only been made possible by the success of our long-term plan.”

Richard Banks, chief executive of UKAR, said: “This deal does suggest that we can do better than our expectation of paying off the Government debt by 2025.”

He said there had been six bidders in the final round of the six-month sell-off period. While there were no more parcels of loans immediately up for sale, he added: “We are constantly on the look out for further asset sales.”

Asked if the success of today’s deal actually meant Northern Rock should not have been nationalised in the wake of the run on the bank in 2007, he said: “Conditions in 2015 are very different to conditions in 2007 and 2008. I don’t think at that stage Northern Rock was a sustainable business.”

The loans sold today are a mixture of performing and non-performing residential mortgages and unsecured loans, most of which comprised the Granite loan book that Northern Rock securitised before the financial crisis. 

Since UKAR’s formation in 2010, its balance sheet has been shrunk by  £73.5 billion, or 63% down to  £42.3 billion. 

Paul Pester, chief executive of TSB, said that the £3.3 billion book it has purchased was made up of “well-performing” loans with an average value of just under £100,000 and  16 years to run.

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November 13, 2015 |
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