UK government looking to sell Northern Rock
It has been revealed that the UK government is actively looking at selling Northern Rock in the short to medium term with a number of bidders already sounded out. There is a growing belief that the business could be split in two with the retail deposit operations and the mortgage book sold as separate entities. The retail side holds deposit approaching £20 billion and the mortgage book is around £66 billion even after a significant wind down of the business.
While there are signs of a potential recovery in the UK economy and the UK financial sector many people are surprised that the government is considering a sale when the banking sector is only a fraction of its value just 18 months ago. However, this is a no-win situation for the UK government because further investment into Northern Rock would attract the wrath of taxpayers and a fire sale would also attract accusations of "giving the business away".
The reality of the matter is that unless there is a recovery in the UK economy and the UK banking sector over the next few months then it is highly unlikely that the UK government will obtain a reasonable price for the operation. This will then put the government in a very difficult situation as the need to raise funds and reduce liabilities becomes ever more critical.
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