Sale talks could save UKAR jobs as mortgage business runs down

The 1,000 staff at UKAR’s operation in Crossflatts are facing a brighter future following the news that talks are progressing well over a sale to private equity or a trade buyer which will secure Crossflatts’ future once UKAR’s mortgage operations are run down.

A library image of the Bradford and Bingley Building Society HQ in Bingley.

UKAR was set up by the Government after it rescued Bradford & Bingley and Northern Rock at the height of the financial crisis.

Its management team has been looking at ways to secure a future for the 1,000 trained staff at Crossflatts once UKAR achieves its goal of offloading the mortgages attached to the “bad bank” part of B&B and Northern Rock’s operations.

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UKAR’s chief executive Richard Banks said he hopes to secure a deal in 2016.

“The aim is to create a stand alone operation for what we call OpCo (the bank’s operating company).

“We have been pleased with the interest,” he said.

“We spent £180m putting these businesses together. We’ve got 1,500 people who are good at the jobs they do - helping customers in distress. It’s a valuable asset that has a future outside nationalisation.”

On top of its staff at Crossflatts, UKAR has another 1,000 employees in Sunderland. Of these 2,000, around 1,500 work in OpCo.

“The number of mortgages under management is reducing and increasingly there will be more time available for our staff,” said Mr Banks.

“We’re all working hard, but we are turkeys voting for Christmas. Every time we sell assets we are reducing potential jobs.

“We’ve had more than one interested party and we hope to do a deal in 2016.”

The need to sell off OpCo will become increasingly important once UKAR completes its plan to sell off £13bn of the mortgages and loans it took on after rescuing ​​B&B and Northern Rock.

Mr Banks said the deal is expected to complete in 2016.

“We’ve completed the first round of bids and received a number that is sufficient to go to a second round,” he said.

“We are evaluating the bids. It’s a bit like selling a house - the highest bid may not be the best bid as they may not be able to complete.”

UKAR hopes to move to a second round with a smaller number of bidders by the end of July.

It doesn’t anticipate completing before the end of this year because the deal will be complex and could face legal hurdles.

Mr Banks declined to identify any of the firms bidding for the £13bn mortgage package or say how many have shown an interest, but he confirmed that the successful bidder will be in the same league as US bank JP Morgan, which bought a £2.7bn mortgage package last year.

“We cannot sell assets to someone not regulated by the FCA. We have a duty to customers to move them to someone respectable and who will treat them fairly,” he said.

The sale to JP Morgan kicked off a flurry of interest from banks and private equity and prompted UKAR to appoint Credit Suisse ​to conduct a strategic review. The conclusion was to sell off another £13bn tranche.

UKAR has performed better than expected since it was set up in 2010 following the banking crisis of 2008.

Mr Banks put this down to a combination of a talented workforce and a more benign economy.

UKAR said it has managed to offload £50bn of the mortgages and loans it took on after rescuing B&B and Northern Rock while mortgages in arrears have fallen by 23 per cent over the past year.

UKAR reduced its balance sheet by a further £8.8bn in the year to March 31 and said almost 30 per cent of the Government loans have been repaid.

It repaid another £3.7bn to the Government over the year, bringing total payments to £14.1bn.

The group’s balance sheet is down 43 per cent in total since 2010, helped by another £5.3bn of mortgage redemptions as rising house prices and low interest rates have encouraged borrowers to look elsewhere for deals.

UKAR chief executive Richard Banks said: “Over the past four and a half years we have achieved excellent results, reducing the balance sheet by nearly £50bn and overseeing a 70 per cent fall in the number of mortgage accounts three or more months in arrears.”

Underlying pre-tax profits rose 11 per cent to £1.4bn in the year to March 31.

Arrears owed by borrowers fell by a quarter to £90.6m.

The group now has 389,000 customers, down from 467,000. UKAR revealed it had set aside another £33m for compensation for mis-selling of payment protection insurance (PPI) for the next three years.