Yorkshire would look at Northern Rock takeover

Share this article
Have your say

Yorkshire Building Society would consider taking over Northern Rock if the Government wants to remutualise the lender, its chief executive has revealed.

Iain Cornish told the Yorkshire Post that he “absolutely supports” efforts by a cross-party group of MPs to persuade ministers to return Northern Rock to its building society roots.

His comments came after the organisation in charge of the UK’s bank holdings asked corporate finance advisers to consider options for its future, which could lead to its sale.

Seventeen MPs have since signed an early day motion calling on the Government to look at remutualising the bank.

“We would be more than happy to talk to the Government to see how we could assist in that process,” said Mr Cornish, who heads Britain’s second biggest building society.

“That does not constitute mounting a bid, but I think it would be good for consumers and the sector and if there is anything Yorkshire Building Society could do to facilitate that, we would be keen to look at it.”

A major obstacle could be the Government’s desire to get the best possible return for the taxpayer on the sale of Northern Rock’s ‘good bank’, said to be worth around £1.5bn.

However, the coalition has also said that it wants to foster diversity in the financial sector, promote mutuals and create a more competitive banking system.

Mr Cornish said: “The difficulty in remutualising it is getting the best value for the taxpayer. In terms of Yorkshire paying hundreds of millions of pounds, it is not possible as we don’t have that level of excess capital.

“If we were going to, we would have to have some sort of structure which would allow it to be bought over a period of time as we generate profit. But in terms of does Yorkshire have credentials in running a large building society which has a good track record? Yes, we do. We think we would have credentials in this space.

“They should definitely look at this as one of the options. I think that’s entirely consistent with what they said in the coalition agreement. Here’s a real opportunity to put their money where their coalition agreement is.”

UK Financial Investments, which manages the taxpayers’ stake in banks, confirmed yesterday that it has asked corporate finance advisers to submit ideas for Northern Rock.

UKFI will choose an investment bank to review options which include “an initial public offering, sale to another bank or remutualisation”, a spokeswoman said.

Chuka Umunna MP, a Labour member of the Treasury Select Committee, who tabled the early day motion, said: “If the Government is serious about promoting mutuals, what better place to start than with the remutualisation of Northern Rock?”

This week, Yorkshire Building Society submitted evidence to the Government-appointed commission looking at reforms to the financial sector to promote stability and competition.

The mutual said the taxpayer-funded bailout of the sector was “necessary and inevitable”, but had led to market distortion in favour of those institutions that received direct support.

“Worse, as the sector emerges from the recession, the very same super dominant banks that catalysed the financial crisis risk being the greatest beneficiaries as they accelerate into recovery, supported by taxpayers,” it said. “This is philosophically unfair, commercially anti-competitive and against consumers’ interests.”

The submission said member-owned business models have a closer alignment between customer interests and the organisation’s objectives and activities, which involve “less risk taking and less focus on potentially illusory indicators of ‘success’ such as growth in market share and short term trading profits”.

The society claimed that mutuals are now “operating in an environment where an unfair advantage stymies competition and seemingly rewards failure”.

Yorkshire has assets of £30bn, 2.8m members and around 3,000 employees. It is Britain’s second biggest building society following its mergers with loss-making Chelsea Building Society a year ago and Barnsley Building Society in 2008.

The Bradford-based mutual is s et to reveal annual results next month, which are expected to show a return to profit. The society recorded its first-ever loss in 2009 after its decision to protect savers from interest rate cuts.

Mr Cornish, 50, an economist by training, joined the society in 1992 and became chief executive in 2003. He is a past chairman of the Building Societies Association and is current chair of the Financial Services Authority’s practitioner panel, which advises the watchdog on the interests of its regulated members.