Sir George Mathewson believes Northern Rock can be revived
by Richard Kilner
Story link: Sir George Mathewson believes Northern Rock can be revived
Transforming Northern Rock’s fortunes would be difficult, but ultimately successful, a member of Sir Richard Branson’s consortium (which seeks to take over the ailing bank) has said.
Sir George Mathewson has previously held the posts of chairman and chief executive of the Royal Bank of Scotland, and made his comments as it become apparent that the Virgin bid was the favoured choice of Northern Rock.
However, not everyone at the bank is so enamoured with the consortium’s offer. RAB Capital has a 7% stake in the bank, and is seeking to prevent the bid from becoming successful as the stakeholder considers it to materially undervalue the bank.
The shares of Northern Rock have had a torrid time of late, and the turbulence continued as they first dropped in value by 30% and then soared above by 28%, closing the day on 110.1p as the firm announced Virgin’s offer was its preferred choice.
Presently Sir George is the chairman of Toscafund, and should the deal go through he would become a senior banking advisor to Northern Rock. He stepped down from his position at the Royal Bank of Scotland in 2006, and is credited with rescuing the bank from the edge of oblivion during the 1990s.
Speaking about Northern Rock’s rescue, he said that it would be challenging and hard, but successful in the end, adding that a three to five year schedule for reviving the firm was a reasonable estimate.
Sir George attributed the bank’s difficulties to a basic flaw in its business model, but believes that otherwise it is both efficient and well-run.
The consortium’s offer would see an immediate £11bn repayment of the Bank of England loan, which is thought to be around £25bn in total, with the remainder to be paid back within three years.
Simon Maughan, a bank analyst for MF Global, believes that the loan repayment scheme put together by the consortium is the critical factor that allowed it to gain the political seal of approval.
In addition, Sir Richard Branson has indicated he would not make any significant job cuts, safeguarding the livelihoods of 6,000 employees.
The deal is not yet done, however. Not only is RAB Capital against it, so is SRM Global, a hedge fund and Northern Rock shareholder.
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