PART-nationalised lender Bradford & Bingley is on the brink of receiving the go-ahead from the European Commission for its package of UK state aid, in a move that will pave the way for a merger of its toxic mortgage book with Northern Rock’s bad bank.
A marriage of Bradford & Bingley and Northern Rock’s bad assets was first mooted last year, when B&B chairman Richard Pym was appointed to a second role as non-executive chairman of Northern
Rock Asset Management, its so-called bad bank.
The merged entity is likely to remain in the clutches of the government for the foreseeable future as an attempt to restore confidence in the sector.
EU competition commissioner Neelie Kroes is understood to be close to approving B&B’s taxpayer bailout. She is also expected to enforce a sale of the firm’s home, motor and life insurance arm.
The news comes after Northern Rock last year underwent an official split of its operations, separating its toxic mortgage book from its good assets, which were packaged up ready for a sale to a UK retail bank later this year. Among the suitors circling the bank are National Australia Bank and Sir Richard Branson’s Virgin Money, which began its foray into the retail banking sector just a few weeks ago with the acquisition of minnow Church House Trust.
B&B received a similar treatment at the time of its rescue in autumn 2008, when the Treasury said it would take over the group’s £50bn loan portfolio and sell its deposits and branches to Spanish bank Santander.
B&B, once one of the UK’s largest buy-to-let and self-certified mortgage lenders, was bailed out after being struck by a sharp rise in wholesale borrowing costs during the credit crunch.