TOP BANKER HIRED TO SPLIT UP ROCK
SENIOR UBS banker Robin Budenberg is set to be named today as the new chief executive of UK Financial Investments (UKFI), the Treasury unit that manages the government’s holdings in UK banks.
Budenberg’s first job will be to oversee the break up of Northern Rock into a “good” and a “bad” bank – a plan that is expected to get the go-ahead from the European Commission today.
The European Union is expected to approve UK authorities’ plans to split Northern Rock into two by early next year, creating a healthy bank of retail deposits, mortgages and branches to be sold off to a third party and a so-called “bad bank” to wind down the loan book.
Banking groups are already circling Northern Rock’s healthy assets, with the Treasury understood to be keen to sell the newly-created entity off to a smaller group to increase competition in the sector.
Virgin Money, led by former RBS banker Jayne-Anne Gadhia, which has applied to the FSA for a banking licence, yesterday confirmed it was interested in the Northern Rock sale.
“Virgin would look at buying whatever comes up,” a spokesman told City PM “Would we be interested in looking at buying up parts of nationalised banks? Yes. Would we be interested in buying Northern Rock? Yes.”
National Australia Bank, which owns Clydesdale and Yorkshire banks, is also said to be mulling an offer for the good bank.
Tesco Bank has also been touted as a potential buyer for the good bank, although it has recently poured cold water on the idea.
Industry insiders said the government would have no problems finding a buyer eventually.
Under the carve-up plan, the Rock’s £18.5bn of customer deposits will be moved into BankCo, the “good bank”, as will?£10bn of good mortgages and £8.5bn in cash.
AssetCo, or the “bad bank”, will be left with £50bn worth of more risky mortgages and £30bn of unsecured loans and Treasury assets.
Around £3bn of the government’s £15bn loan to Northern Rock will be converted into capital, with half of that going to BankCo, which will also get another £8bn government loan to sell new mortgages.
The EU is expected to place restrictions on the amount of mortgages BankCo can issue until the state aid has been repaid.
Budenberg, who has worked in?UBS’ London offices since 1984, has previously advised the government on the bailouts of Northern Rock, Lloyds Banking Group and Royal Bank of Scotland.
He will replace outgoing UKFI boss John Kingman, who is leaving to take a job in the private sector.