Rock deal dashes hopes of profits from sell-offs
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The unprofitable sale of Northern Rock has raised concerns as to whether the government can make a profit from the sale of its stakes in other nationalised banks.
Last week the government revealed it had sold its share in Northern Rock to Virgin Money for £747m.
It could get a further £280m over the next three years depending on the bank’s performance, which means taxpayers - who have put in £1.4bn - will lose at least £400m.
Samuel Tombs, UK economist at Capital Economics, says: “The sale has raised hopes that the government may be able to sell its stakes in the Royal Bank of Scotland and Lloyds Banking Group. But their share prices are around 60% below the level at which the government acquired them.
“A £40bn loss would be realised if the government’s holdings were liquidated at current prices. So a profitable exit from financial sector interventions remains a dream.”
Northern Rock will be rebranded Virgin Money, which has promised it will not make job cuts for the next three years.
But Adrian Coles, director-general of the Building Societies Association, says: “Denationalising the bank is positive but we would have welcomed Northern Rock’s return to the mutual sector.”
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