I wrote here in July that I was hoping to see history reversed at Northern Rock. Shortly after that, Swiss boffins declared that time travel really might be possible, after discovering they could fire neutrinos through an Alpine tunnel at a fraction faster than the speed of light. But the idea of propelling the privatised remains of the Rock backwards through several decades — to emerge as a mutually owned and socially responsible provider of mortgages to sensible savers in the north-east — was never high on the Treasury’s agenda.
The bank whose 2007 collapse heralded 2008’s financial armageddon was always going to be sold to the highest bidder at the earliest moment a deal could be made to stand up and not look too embarrassing for George Osborne. That is what has now happened: Virgin Money is paying £747 million plus a stream of future payments that could yield a final price close to the bank’s £1.1 billion ‘book value’. Though this is a loss against £1.4 billion of taxpayer bailout money, it doesn’t look bad in relation to current stockmarket valuations of banks at discounts to book of 50 per cent or worse.
Labour spokesmen said Osborne should have held on for a better deal. Osborne parried by claiming a ‘secret Labour deal with Brussels’ over a deadline for the sell-off had obliged him not to linger. The truth is that conditions in the banking sector are likely to deteriorate in coming months, so £747 million now and one less patient in the Treasury sanitorium is a reasonable outcome. And my man in the stand at what used to be St James’ Park tells me Geordies are far less concerned at the rebranding of the Rock’s surviving 75 branches under the banner of Virgin Media than they are at the renaming of their football stadium as the Sports Direct Arena by Newcastle United’s controversial owner, retail entrepreneur Mike Ashley.
Though the Rock’s charitable foundation continues to do good works in its home territory, the bank itself began to destroy its roots when it demutualised, joined the FTSE 100 and launched its ultimately catastrophic bid for national market share under the leadership of Adam Applegarth. Perhaps better that it should slip into history after all.
My man in the Treasury canteen texts that Osborne’s officials were keen to close the Rock file so they could focus on the far more serious challenge of Lloyds — where chief executive António Horta-Osório is on medical leave suffering nervous exhaustion while a flurry of other senior comings and goings (including the non-arrival of a high-profile recruit from RBS, Nathan Bostock, who decided not to bother) suggest an implosion of management morale. Not even veteran chairman Sir Win Bischoff, renowned for his upbeat leadership skills, has been able to hold the team together as it grapples with the legacy of HBOS, and in particular the follies of Bank of Scotland, in the distant hope of knocking the group into shape for a sell-off of the taxpayers’ 41 per cent stake.
Reports soon after the Lloyds-HBOS merger revealed that more than two thirds of the Bank of Scotland’s £116 billion corporate loan portfolio had been categorised as ‘outside Lloyds’ risk appetite’, which was a polite way of saying that no decent banker should ever have signed it off. But it was signed off by, among others, Bank of Scotland’s Peter Cummings, who retired on a £350,000 pension, and HBOS chief Andy Hornby, who went on to run Alliance Boots and Coral the bookmaker. Everyone remembers the names of Adam Applegarth of Northern Rock and Sir Fred Goodwin of RBS, but history may judge the HBOS men to have been the worst of the lot.
Speaking of reputations, the Northern Rock sale has provoked surprisingly little flak in the direction of Virgin tycoon Sir Richard Branson. When he first sniffed around the Rock in 2008, it was widely said that he would only rescue it on risk-protected terms heavily skewed in his favour — while those in the City who never liked the cut of his jib whispered he wasn’t the sort who should be allowed to own a bank anyway.
Now he has pulled off a classic Branson coup, in which Virgin itself is putting up only £50 million (the rest of the outside cash is coming from a sharp-pencilled American investor, Wilbur Ross, and from Abu Dhabi) while £250 million of the purchase price will be extracted from Northern Rock itself — having been labelled ‘excess capital’. Yet even on those terms, he has been favoured over a competing bid from NBNK, whose board is led by City grandees Lord Levene and Sir David Walker. As the years roll by, Branson has seen off many detractors and all those (including the mighty Tom Bower) who predicted his empire must surely collapse. Forty years after he ran into a spot of bother with Customs & Excise over his first hippy-ish mail-order record venture, he’s in danger of becoming an elder statesman.
No threat to waders
‘Time for a trip to Boris Island,’ I wrote last year, in support of the Mayor’s fantastical £40 billion vision of a world-class airport in the Thames estuary. Since then, this idea seemed to have sunk gently into the mud, attention having shifted to the ramshackle ‘Heath-Wick’ scheme to link London’s existing major airports by high-speed train and run them as a single passenger nightmare rather than two competing ones. But panic has been stirred this week among defenders of wading-bird habitat, as well as those who are inherently suspicious of budget-busting grands projets, by the news that the estuary option has won the ‘staunch support’ of Steve Hilton, the Prime Minister’s all-powerful policy chief. I’m glad to hear he has embraced this bold concept, but I can also reassure its opponents. The amiable and articulate Mr Hilton once sat on a voluntary committee I chaired; he was wont to enthuse about all sorts of amazing possibilities, but never delivered anything at all.