NAO forecasts net loss on Rock of up to £2bn
TAXPAYERS could effectively pay about £2bn to wind down all of Northern Rock’s assets, the National Audit Office has estimated, in a report that also reveals that the government successfully bid up the price of the bank it sold by some £60m.
The NAO says that taxpayers could be left hanging onto some assets from the “bad bank” for 10-15 years. The public purse will probably escape losing money on them because of its low cost of funding, the agency said, but if the government had to fund them at “typical” market costs, the net present cost is forecast to be £2bn.
However, the Treasury and the agency UK Financial Investments (UKFI) acted “reasonably” in pursuing a sale of the “good bank” as soon as possible, the NAO said, concluding: “A delayed sale would not have been better value.”
And the report also documents the bidding process for the “good bank” in detail: it reveals that JC Flowers submitted an offer that would have partially mutualised Northern Rock and combined it with One Savings Bank. But the private equity firm withdrew its bid. Instead, NBNK and Virgin Money slugged it out over the bank until Virgin outbid its rival by about £90m.