Another potential bidder for Northern Rock has emerged, and it’s Bradford & Bingley. This has to be regarded as a surprise because B&B is a similar beast to Northern Rock, in that they are both building societies that have become mortgage banks. Therefore it was suspected that B&B might eventually have similar problems to those which have grounded Rock. Less than half of B&B’s cash deposits come from savers.
Nevertheless, B&B was one of the original ten or so organisations to come forward when Rock first asked for bidders some three months ago.
Although B&B said it was ‘not currently planning a bid for Northern Rock‘, it would not comment on whether it had an interest in parts of the beleaguered bank. Northern Rock shares went up 7% on Wednesday.
B&B has sold two of its mortgage books in the past four weeks or so to firm up its position, and it has said that it has raised £2.5bn on the money markets since the credit crisis hit. Profits, it says, are still in line with forecasts. Despite all this, it has admitted a £265m exposure to assets related to the sub-prime market.
The current understanding is that B&B might be interested in buying somewhere between £5bn and £10bn worth of Northern Rock mortgages. The Rock board, however, appears to be more interested in a complete bail-out as could be supplied by Virgin or financial services group Olivant.
Calculations have revealed that each tax payer is contributing £1,800 to keeping Northern Rock afloat, with the Bank of England having contributed £57bn so far. Chancellor Alistair Darling wants to ensure that any emergency rescue of a bank in the future can be dealt with more quickly. He said: “We need a system that can respond to difficulties in the future and problems that arise quickly. We need to make the Bank of England, the Treasury and the Financial Services Authority more responsive and clarify the responsibilities of the three.
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