Tesco 'eyes' buying Northern Rock
Tesco is reported to be considering making a move to buy Northern Rock.
The Times reports the supermarket chain, which already has fingers in the financial services through Tesco Personal Finance, has expressed a provisional interest in buying Northern Rock.
It is believed the government has already received overtures from a number of sources, but the Treasury maintains the line any deal would have to provide value for the taxpayer.
Tesco is refusing to comment on the story.
Other interested parties in taking over Northern Rock include Virgin and some private equity firms.
Northern Rock currently owes the government around £8.9 billion - down from total loan of £26.9 billion provided when it faced collapse in 2007.
A buyer would have to find some £3 billion worth of capital to inject into the bank as well as meeting an asking price to cover Northern Rock's assets of its branches and mortgage book.
An imminent sale of Northern Rock is not expected, although there is pressure for the government to find a buyer before an expected General Election next year.
The political capital from the taxpayer turning a profit on the deal would great for the government and for Gordon Brown - and would be a major turnaround from estimates last year when the Novocastrian mortgage lender was nationalised that it may be in public hands for a decade.
Tesco has already started making moves into the full bank market - beyond the insurance, savings, loans and credit cards it already offers.
Over 2009 it is trialling in-store banks offering current accounts in 30 branches across the country.
Last week Northern Rock announced it was to restructure - splitting its savings and new lending business and its existing mortgage book, in a move popularly described as creating a 'good bank/bad bank' split.
Northern Rock said its mortgage book was performing well, but it does have higher levels of arrears than the industry average.
This morning the Financial Services Authority moved to waive the limits on the bank's use of Tier 2 capital so it can be stated in the minimum regulatory capital requirements.
Northern Rock stated it "proposes to address this situation" of having a capital base reduced to a level below its minimum regulatory capital requirement, through the restructuring.
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