Potential suitors decide against bidding in sale of bank assets

Yorkshire Building Society yesterday confirmed it had decided against bidding for Northern Rock, the state-owned former building society nationalised three years ago.

Separately, Yorkshire Bank’s parent company National Australia Bank (NAB) is understood to have decided, based on current terms, against bidding for 630 Lloyds branches put up for sale by state-backed Lloyds Banking Group. NAB is thought to have been put off by the expected £3bn price tag and a high funding gap, said sources familiar with the deal.

Yorkshire Building Society, the UK’s second-biggest building society, had toyed with remutualising Northern Rock but instead said it would concentrate on its merger with rival Norwich and Peterborough and its recently announced deal to buy the mortgage and savings books of internet bank Egg.

“While we believe that the remutualisation of Northern Rock is the right thing, at this time this is not the transaction for our current and future members,” said a Yorkshire spokeswoman. “We are busy focusing on those two transactions.”

Mutuals, owned by their members, have led a campaign to remutualise Northern Rock. Coventry Building Society had expressed an interest but confirmed yesterday it had not made a bid. Virgin Money is also thought to have submitted an expression of interest to buy Northern Rock.

Earlier this week, outgoing Yorkshire chief executive Iain Cornish admitted its chances of buying the Rock were a “long shot”.

Mutuals, which are owned by their members, cannot raise capital through share issues unlike their listed bank counterparts.

Lloyds, 41 per cent owned by the taxpayer after its rescue takeover of Halifax Bank of Scotland, is being forced by the European Union to put the 600-plus branches on the block as a condition of taking state aid. “They (NAB) have weighed the pros and cons of chasing a deal. At the moment the cons are higher,” said a source.

NAB, which also owns Clydesdale Bank in the UK, has been looking to bulk up its UK operations which comprise about 340 branches and 70 business banking centres.

NAB is thought to still be interested, but only if the branches drop in price by at least a fifth.

The Lloyds branches on their own would create Britain’s seventh-biggest bank or building society, with a 4.6 per cent share of the current account market.

NAB’s withdrawal will be a blow to Lloyds’ new Portuguese chief executive António Horta-Osório, who upon appointment in March said he would speed up their disposal.

Yorkshire Bank declined to comment.