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Northern Rock to Tesco bank; is something afoot?

A few years ago any thought that Tesco would be a potential buyer of Northern Rock would have been, well, ludicrous. We live in unusual times and a deal to sell Northern Rock to Tesco does not look out of the question. The facts are making this potential deal look likely, if not certain.

Tesco is building its banking subsidiary in the North of England and have started a recruitment drive. There are plenty of ex Northern Rock people looking for jobs. The Northern Rock bank business has significant accounts and even through its financial problems it has never been made certain whether the bank was illiquid or bust. The split of good and bad bank with the good to be sold and the bad run down is fast tracking the government out of the bank.

Why there has been such a lengthy delay in providing information on the real financial picture of Northern Rock is clearly political. The clouds around Northern Rock will eventually part and I can guess that the true story will be somewhat embarrassing to the Government.

As the Government has been extremely frugal with so much information about the financial state of Northern Rock it smacks of a cover up. Could the bank been just suffering cash flow problems that would have been dealt with in due course. If there had not been a run on the bank, would the bank have eventually worked through and managed their problems? In normal economic times would the Government have stepped in?

The Government needs funds and needs to make a statement that they are looking to get out of the banks it propped up, as soon as is practicable. The sale of Northern Rock to a publically trusted brand like Tesco looks like a good way out.

Such a move would be politically attractive and set the future policy for the Government to sell off its banking assets, with a profit and would create more competition for banks in the high street. The split of good and bad bank sounds to me like the set up of a sale. Would the sale be to another bank too large to fail or to small bank looking to grow?

A deal is likely but only time will tell if it's Tesco. Despite Tesco's denials, I am just getting a feeling in my water, that something's afoot!


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