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Northern Rock snaps up L&G for £131m

Northern Rock last week acquired Legal & General Bank and its subsidiaries for a cash sum thought to be close to £131m, generating a pre-tax profit of £36m for the insurer.

Northern Rock chief executive Adam Applegarth says: “This is an attractive deal for us. We have been seeking opportunities to augment our business by buying high-quality mortgage books. Northern Rock will be acquiring a funded, low-risk, high-performing mortgage book at a fair premium of £36m above net-asset value.”

Applegarth adds: “An important part of this arrangement is our intention to set up an additional branded product relationship with L&G to originate future mortgage and retail deposit business.”

L&G Bank manufactures and distributes residential mortgages, personal loans and retail deposits to nearly 106,000 customers. As of May 31 2002, the bank had £1.2bn of mortgages, £65m of personal loans and £1.2bn of retail deposits. Subsidiary L&G Mortgage Services was L&G&#39s original mortgage provider but no longer makes new mortgage advances. As of May 31, the outfit had 3,000 customers and £127m of outstanding mortgage advances. Northern Rock will maintain the L&G Bank name for three months from the date of acquisition and will continue to offer mortgage products under the L&G brand on a white-label basis. L&G&#39s Mortgage Club is unaffected by the purchase.

Northern Rock, whose five-year protection from takeover ends in October, will manage both existing and new accounts.

L&G says the deal will allow the group to concentrate on its core business in long-term savings, protection and general insurance.

David Prosser, group chief executive, says: “While L&G Bank has been innovative and successful, it is operating in a crowded and competitive sector.”

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