Losses force Northern Rock to cut costs again
Northern Rock, which will this week reveal losses in 2010 of about £230m, is expected to launch a cost-cutting programme and step up efforts to woo new customers.
A Rock in a hard place: Bank to reveal it is £230m in red
The taxpayer-owned bank, whose collapse in 2007 heralded a wider crisis, will say losses have slowed but is expected to start cutting back office costs to prepare for privatisation.
Northern Rock is now split into a retail bank and Northern Rock Asset Management, which holds the bulk of the old bank's assets.
It has no plans to close branches but having shrunk its assets base, its costs are far larger than merited for its size.
It will also announce a fresh drive for growth, selling new products. A first step was last week's launch of 90% mortgages aimed at first-time buyers.
The bonus pool for its 4,000 staff will be about £13m. With average salaries at about £25,000, most staff will get a payout of about 10%. Executive chairman Ron Sandler, who is paid £250,000 a year, is not eligible for a bonus for 2010.
Northern Rock is also expected to confirm that investment bank Morgan Stanley has been appointed to look at how to return it to private ownership and recoup some money for the taxpayer. Sources say mutualisation or a public offering of shares are the least likely options.
Virgin Money is a potential buyer. Cash shell NBNK, set up last year to buy bank assets, said it has little interest in the sale, although former Rock boss Gary Hoffman is set to become its chief executive in May.
Another option would be for Northern Rock to be combined with 600 branches being sold this year by Lloyds Banking Group. However, such a scheme could be highly complex to arrange.
Tax attack
Britain's banks paid just £342m in corporation tax for 2010.
In the last fortnight Standard Chartered announced it had paid £106m and HSBC £236m. Royal Bank of Scotland is loss-making and paid no tax.
Lloyds paid no tax despite its profits by offsetting past losses. Barclays did not disclose its UK corporation tax bill for 2010 but did declare it had paid £113m for 2009.
In the Merlin agreement with the Government the banks said their total tax contribution was £8bn, but this included such indirect payments as National Insurance and VAT.
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