Page last updated at 08:55 GMT, Wednesday, 10 June 2009 09:55 UK

Treasury 'eyes autumn Rock sale'

Northern Rock branch
Two years ago people queued to take their money out of Northern Rock

The Treasury is investigating the prospect of selling state-owned bank Northern Rock as soon as the autumn, according to a report in the Times.

Finding a City buyer or a stock market flotation are both options, it said.

Selling the Rock to the private sector at a profit would look good politically if it got full value, the paper said.

Treasury sources said it was "very unlikely" the Rock would be sold this year, saying that ministers were "in no hurry" to push through a disposal.

Separately, former Rock investors go to court on Wednesday in a renewed attempt to be compensated for their shares.

They are trying to overturn a government compensation scheme, which they say will result in their shares being worthless in the wake of nationalisation.

But analyst Ralph Silva of Tower Group told the BBC that shareholders should wait until the bank was sold and that then - with a value placed on it - they would be better placed to claim compensation.

Voter factor

Northern Rock experienced the first run on a UK bank in more than a century after it was forced to seek emergency funds from the Bank of England in September 2007.

The Times said the Treasury was in no hurry to sell the Rock - which has been repaying the government. It still owes £8.8bn of the £27bn it was loaned at the end of 2007.

The bank has cut staff volumes and slashed the size of its mortgage book - its only real asset - to £100bn.

The paper said that a sale of the bank at a profit could help convince voters that Gordon Brown had overcome the crisis that led the UK banking system to near collapse.

The government's aim has always been to eventually sell the Rock - but if it did manage to offload it during 2009 at a good price, this would be well ahead of most expectations, observers say.

Legal action

Lawyers for the former Northern Rock shareholders say that when the government took over the bank and the shares of the investors without compensation, it was a breach of human rights.

They claim that there should be compensation that reasonably relates to the value of the bank.

The case has been brought by two major investors, SRM Global and RAB Capital, and up to 200,000 private shareholders who held as much as 25% of the shares in the Newcastle-based bank.

The private shareholders, including existing and former Northern Rock employees - many at risk of losing their retirement "nest egg" shares - are backed by the UK Shareholders Association.

But there is concern that the institutional investors - some of whom had bought Northern Rock shares towards the end of its life as a private firm - had bought into the firm on the gamble that they would be compensated by the government should things go wrong.

In an earlier High Court action, a judge ruled that, had the Bank of England not stepped in to save the Rock, it would have been unable to pay its debts and it would have had to cease business.



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SEE ALSO
EU broadens Northern Rock probe
07 May 09 |  Business
Borrowers flock to Northern Rock
23 Apr 09 |  Business
Treasury slated over Rock lending
20 Mar 09 |  Business
Rock report adds to ammunition
20 Mar 09 |  UK Politics
Curbs on risky banking proposed
18 Mar 09 |  Business
Bank nationalisation 'not needed'
08 Mar 09 |  Business
Northern Rock makes 1.4bn loss
03 Mar 09 |  Business

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