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Northern Rock

Coordinates: 55°00′37″N 1°37′34″W / 55.0104°N 1.6260°W / 55.0104; -1.6260
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See also: Nationalisation of Northern Rock
Northern Rock
Company typePublic ownership[1][2]
IndustryBank
Founded1965
Headquarters
Gosforth, Newcastle upon Tyne
,
England, UK
Area served
UK, Ireland
Key people
Ron Sandler (Non-Executive Chairman)
ServicesBanking, Mortgages
Revenue£5 billion (2006)
£627 million (2006)
£443 million (2006)
OwnerHer Majesty's Government
Number of employees
c. 4500 (as of September 2008)[3]
Websitewww.northernrock.co.uk

Northern Rock plc (former London Stock Exchange ticker symbol NRK) is a British bank, under public ownership from 2008. It is based at Regent Centre in Newcastle upon Tyne in North East England in the United Kingdom. Formerly the Northern Rock Building Society, the bank was formed in 1997 when the society floated on the London Stock Exchange.

History

Northern Rock Building Society was formed in 1965 as a result of the merger of Northern Counties Permanent Building Society (established in 1850) and Rock Building Society (established in 1865). During the 30 years that followed, Northern Rock expanded by acquiring 53 smaller building societies, most notably the North of England Building Society in 1994.[4]

Along with many other UK building societies in the 1990s, Northern Rock chose to demutualise and float on the stock exchange, to be able to expand their business more easily. Throughout this period a concern against demutualisation was that the assets of a mutual society were built up by its members throughout its history, not just by current members, and that demutualisation was a betrayal of the community that the societies were created to serve.[5][6][7][8] Northern Rock chose to address these concerns by founding the Northern Rock Foundation.[9] At its Stock Exchange flotation Northern Rock distributed shares to members who held savings accounts and mortgages. It joined the stock exchange as a minor bank and was expected to be taken over by one of its larger rivals, but it remained independent.

In 2000, Northern Rock gained promotion to the FTSE 100 Index, but was demoted back to the FTSE 250 in December 2007[10] and later suspended from the LSE due to the bank's nationalisation.

On 14 September 2007, during the financial crisis of 2007–2009, the Bank sought and received a liquidity support facility from the Bank of England,[11] following problems in the credit markets caused by the US subprime mortgage financial crisis.

At 00:01 on 22 February 2008 the bank was taken into state ownership (see the Nationalisation of Northern Rock). The nationalisation was a result of two unsuccessful bids to take over the bank, neither being able to fully commit to repayment of taxpayers' money.[12] The government-appointed Chairman Ron Sandler assumed the position on 18 February.[13]

Operations

A typical Northern Rock branch, on Northumberland Street, Newcastle upon Tyne. The clock outside this branch, the bottom of which can just be seen, is emblazoned with the bank's name and has become a popular image in print and television coverage of the Northern Rock crisis.

Northern Rock is one of the top five mortgage lenders in the United Kingdom in terms of gross lending.

As well as mortgages, the bank also deals with savings accounts, loans and insurance. The company also promotes secured loans to its existing mortgage customers. The unsecured loans business is administered and underwritten by Ventura based in Leeds. Home and contents insurance is dealt with by AXA whilst Legal & General, whose mortgage book Northern Rock took over, arrange insurance and stock-market-based investments. Payment Protection Insurance (PPI) can be arranged with London-based Cardif Pinnacle.[14]

In 2003, to free capital for its rapid growth in mortgage lending, the bank sold its credit card business to The Co-operative Bank for a profit of more than £7 million. Until November 2007 Northern Rock continued to sell credit cards under their own brand through The Co-operative Bank; the decision to stop was made before the 2007 crisis.[15]

In 2006 the bank had moved into sub-prime lending via a deal with Lehman Brothers. Although the mortgages were sold under Northern Rock's brand through intermediaries, the risk was being underwritten by Lehman Brothers.[16][17]

Location

The 1990s buildings at Regent Centre.
The 2008 Tower Building, during the final stages of construction.

The bank is based on a large site at the Regent Centre in Gosforth, Newcastle upon Tyne. It has customer contact centre operations at both Doxford International Business Park in Sunderland and at its head office. The bank is also developing a site at Rainton Bridge,[18] which it is now seeking to sell or let to a third party.[19]

Gosforth site

Northern Rock has recently completed the redevelopment of the Gosforth site, Northern Rock House, which saw the demolition of the original 1960s tower block during Spring 2006. A new tower block, simply known as The Tower,[20] was completed in November 2008, originally intended to create 1500 jobs, and act as the main entrance and focal point of the company headquarters.[21] This will now also likely be sold or leased as the additional space has become surplus to requirements.[22]

The Gosforth site currently consists of the Kielder and Prudhoe buildings, completed in the early 1990s, behind which lies the distinctive glass-fronted Alnwick building. The main Atrium reception is adjacent to this, opening out onto Baker Street, a large covered atrium that houses a restaurant, shop and on-site branch. A number of other buildings, all named after North-Eastern castles are joined to Baker Street.

Outside the UK

A sub-division in Guernsey was established in February 1996,[23] handling offshore savings and investment accounts.

Northern Rock opened a branch in Ireland on 16 November 1999[24] and the first branch in Northern Ireland followed on 4 April 2007. The first branch of the bank opened in Denmark on 7 February 2007;[25] however as part of the Government restructuring, the Danish operations were to cease by the end of 2008.

Corporate image

Northern Rock logo used until 2000

In 2000 Northern Rock introduced a new corporate identity consisting of a magenta square containing the company name. This replaced the NR 'blocks' logo. To this day however, some branches still display the old logo. The Northern Rock Foundation also changed its logo in 2003 from the NR 'blocks' inline with the main company, using the same new typeface. The Red Box Design Group designed all the currently standing buildings at the company's headquarters in Gosforth[26][27][28][29][30][31] and have contributed to many of the other design aspects of the company, such as the in-branch styling.[32] From 1 October 1997 until the government nationalisation, the bank used the symbol NRK on the London Stock Exchange.

Board of Directors

Prior to the credit crisis the company had focused on developing its own staff and most appointments including the Chief Executive, were made internally.

John Devaney and Simon Laffin joined the board in November 2007, when Sir Derek Wanless, Nichola Pease, Adam Fenwick and Rosemary Radcliffe retired as Non-Executive Directors. The Chairman, Matt Ridley resigned as did the Chief Executive Adam Applegarth, although the latter stayed on in a caretaker role until December 2007. David Baker and Keith Currie left the board, but remained employed within the company.

The Chief Executive was Andy Kuipers, who joined the company in 1987, and retired on 31 August 2008.[33] In February 2008, Ron Sandler was appointed Executive Chairman by the government. Bryan Sanderson, Sir Ian Gibson, David Jones and Paul Thompson retired from the board at this time.[34] Gary Hoffman became Chief Executive of Northern Rock in October 2008. He has previously been the vice chairman of Barclays and a former Managing Director of Barclaycard.[35] With the appointment of Gary Hoffman, Ron Sandler changed to a Non-Executive Chairman position.

In January 2009 it was announced that Ann Godbehere would be leaving her post as Chief Financial Officer at the end of February.[36]

As of 14 October 2008, the Board of Directors comprised:[37]

  • Chief Executive: Gary Hoffman
  • Non-Executive Chairman: Ron Sandler
  • Chief Financial Officer: Ann Godbehere
  • Non-Executive Directors: Laurie Adams, Kent Atkinson, Richard Coates, John Devaney, Simon Laffin, Philip Remnant and Tom Scholar

Sponsorship

The company sponsored many local sports clubs and events, including Newcastle United Football Club,[38] Newcastle Falcons (rugby union), Newcastle Eagles (basketball), Durham and Middlesex County Cricket clubs, professional golfer Paul Eales and the cycling festival Northern Rock Cyclone.[39] The sponsorship of Newcastle United began in 2003, and was set to expire in 2010. The current five year deal from 2005 to 2010 was worth £25 million.[40]

In 2005, to coincide with the Spirit of the Tall Ships Festival, Northern Rock enlisted the help of Red Box Interiors to create a temporary art installation at The Baltic Centre for Contemporary Art on the Gateshead Quay of the Tyne. The art entitled "Northern Rock @ Baltic" included mobile light stem sculptures and large scale external graphics.[41]

Northern Rock sponsors the North East Premier League competition for recreational club cricket.[42] In 2006 Northern Rock sponsored the All*Star Cup celebrity Golf match, which was shown on ITV.[43] [44] The bank also sponsors a junior golf tournament, The Rock Junior Golf Festival, held at Matfen Hall.[45]

In 2007, almost three weeks before the bank had to appeal to the Bank of England for an emergency loan, the bank bought the home ground of Newcastle Falcons Rugby Club, Kingston Park stadium[40] for £15 million. In February 2008, documents relating to the sale came to light, attracting much criticism that the purchase has been made at a time of impending crisis.[46] In late 2008 the bank sold Kingston Park Stadium to Northumbria University for an undisclosed fee.[47]

It was confirmed on 20 May 2008 that Northern Rock would continue to sponsor both Newcastle United and the Newcastle Falcons, the former due to the long term agreement between them and the club.

Northern Rock Foundation

The company donates substantial amounts annually to its own charity, the Northern Rock Foundation. The foundation was formed when the company was floated, with an initial donation of 15% of the share capital and a covenant to donate 5% of the company's annual profit thereafter.[48][49] In 2006, Northern Rock was the second largest charitable giver in the FTSE 100 after ITV.[50]

In April 1996, when the Building Society was considering demutualisation, plans were announced by the then chairman, Robert Dickinson, for the creation of the foundation. Since the official launch of the foundation in January 1998, it has steadily grown and expanded its activities. The Foundation's work is carried out by a professional staff team of 13 based in Gosforth.[51] In 2003, along with a new logo and the introduction of new programmes, the Foundation moved to a new building – the renovated Old Chapel in Gosforth. At the end of 2006 the foundation received £28.2 million investment. By the end of 2007 £190 million had been donated to the foundation, by Northern Rock.

Nationalisation ended the covenant requiring Northern Rock to remit a share of profits to the Foundation. Instead, for the next three years the Foundation was to receive an annual £15 million payment from Northern Rock, whether it remained publicly-owned or returned to the private sector. The Foundation's shares were to be cancelled and compensated in the same way as those of other shareholders.[52] £7.3 million was awarded during the first 10 months of 2008, with an expected further £3.7 million before the end of the year.[53]

Subprime mortgage crisis and nationalisation

Main article: Nationalisation of Northern Rock
People queuing outside a branch to withdraw their savings due to fallout from the subprime crisis.

On 14 September 2007, the Bank sought and received a liquidity support facility from the Bank of England, following problems in the credit markets. This led to many customers queuing outside branches to withdraw their savings (a run on the bank).

On 22 February 2008 the bank was taken into state ownership. The nationalisation was a result of two unsuccessful bids to take over the bank, neither being able to fully commit to repayment of taxpayers' money.[1] The Bank is managed at "arms length" by the government through UK Financial Investments Limited.[54]

The bank planned to repay the government debt within three to four years, and one of the measures taken to do this was by reducing numbers of staff.[55] As of 30 September 2008 the bank was repaying the loan well ahead of target, owing a net balance of only £11.5 billion of the loan which stood at £26.9 billion at the end of 2007.[56]

By October customers appeared to be regaining confidence in the bank, when it emerged that there had been a surge in the number of new accounts which had been opened.[57] People appeared to see the Northern Rock as a safe place to put their money, given the current status as a nationalised bank which cannot fail.[58] Former shareholders are also taking legal action against the Government to get a fair level of compensation for their shares.[59]

See also

References

  1. ^ a b "Northern Rock now in public hands". BBC News. 2008-02-22. Retrieved 2008-04-06.
  2. ^ "The Northern Rock plc Transfer Order 2008" (PDF). HM Treasury. 2008-02-22. Retrieved 2008-04-06.
  3. ^ "Northern Rock confirms jobs cuts". BBC News. 2008-08-29. Retrieved 2008-09-16.
  4. ^ "Reference numbers DT.NP, DT.NR and DX767". Tyne and Wear Archives Service. {{cite journal}}: Cite journal requires |journal= (help)
  5. ^ "Building societies resist carpetbaggers". BBC News. 1999-01-02. Retrieved 2008-02-20.
  6. ^ "House of Commons Hansard Debates for 10 Mar 1997 (pt 28)". The Stationary Office. 1997-03-10. Retrieved 2008-02-20.
  7. ^ "House of Commons Hansard Debates for 17 Mar 1997 (pt 17)". The Stationary Office. 1997-03-17. Retrieved 2008-02-20.
  8. ^ "Anthony Hilton of the Evening Standard on the battle for Standard Life". This is Money. 2000-05-19. Retrieved 2008-02-20.
  9. ^ "History". Northern Rock Foundation. Retrieved 2008-04-08.
  10. ^ "Northern Rock drops from FTSE 100". BBC News. 2007-12-12. Retrieved 2008-02-20.
  11. ^ "Liquidity Support Facility for Northern Rock plc - Tripartite Statement by HM Treasury, Bank of England and Financial Services Authority". Bank of England. 2007-09-14. Retrieved 2008-02-20.
  12. ^ "Northern Rock to be nationalised". BBC News. 2008-02-17. Retrieved 2008-04-08.
  13. ^ "Rock recovery is Sandler's goal". BBC News. 2008-02-18. Retrieved 2008-02-20.
  14. ^ "Pinnacle Insurance". Retrieved 2008-04-06.
  15. ^ "Northern Rock and Co-op cancel credit card tie-up". The Independent. 2008-02-12. Retrieved 2008-02-21.
  16. ^ "Northern Rock ups sub-prime rates". BBC. 2007-08-24. Retrieved 2007-09-17.
  17. ^ "Stock Exchange Announcement Northern Rock PLC: Trading Statement For The 9 Months to 30 September 2006". Northern Rock. 2006-10-02. Retrieved 2007-09-17.
  18. ^ "Rainton Bridge". Rainton Bridge. Retrieved 2008-12-23.
  19. ^ "Redundant Northern Rock staff leave". The Press Association. 2008-08-29. Retrieved 2008-08-29.
  20. ^ "Tower becomes cornerstone of campus". Red Box Design Group. 2008-11-28. Retrieved 2008-12-19.
  21. ^ "It's boom time for Northern Rock". Evening Chronicle. 2007-07-25. Retrieved 2008-10-09.
  22. ^ "Northern Rock tower may be sold, bank boss admits". The Northern Echo. 2008-05-13. Retrieved 2008-08-06.
  23. ^ "About Us". Northern Rock (Guernsey) Limited. 2008. Retrieved 2008-02-20.
  24. ^ "Northern Rock celebrates 5th anniversary of Irish launch". Northern Rock Ireland. 2004-11-16. Retrieved 2008-04-06.
  25. ^ "Nyheder" (in Danish). Northern Rock (Denmark). 2008. Retrieved 2008-02-20. [dead link]
  26. ^ "Northern Rock Building Society Headquarters 1992". Red Box Architecture. Retrieved 2008-04-06.
  27. ^ "Northern Rock 1994". Red Box Architecture. Retrieved 2008-04-06.
  28. ^ "Northern Rock Campus Development Phase 2". Red Box Architecture. Retrieved 2008-04-06.
  29. ^ "Northern Rock 2005". Red Box Architecture. Retrieved 2008-04-06.
  30. ^ "Northern Rock - Phase 4". Red Box Architecture. Retrieved 2008-04-06.
  31. ^ "Northern Rock Tower 2008". Red Box Architecture. Retrieved 2008-04-06.
  32. ^ "Northern Rock Roll-out". Red Box Architecture. Retrieved 2008-04-06.
  33. ^ "Stock Exchange announcement - Northern Rock plc update". Northern Rock. 2007-12-13. Retrieved 2008-10-15.
  34. ^ "N.Rock Unveils Board Changes as Govt Takes Over". Reuters. 2008-02-22. Retrieved 2008-10-15.
  35. ^ "New Northern Rock boss appointed". BBC News. 2008-07-23. Retrieved 2008-07-23.
  36. ^ "Northern Rock finance chief exits with £900,000". The Times. 2009-01-09. Retrieved 2009-01-10.
  37. ^ "The Board - Biographies". Northern Rock. Retrieved 2008-10-14.
  38. ^ "Magpies extend sponsorship deal". BBC News. 2004-04-20. Retrieved 2008-04-08.
  39. ^ "Sponsors". Northern Rock Cyclone. Retrieved 2008-10-13.
  40. ^ a b "Newcastle seek Northern Rock talks". The Daily Telegraph. 2008-02-21. Retrieved 2008-04-06.
  41. ^ "Northern Rock @ Baltic". Red Box Interiors. Retrieved 2008-04-06.
  42. ^ "About us". Play Cricket - North East Premier League. Retrieved 2008-10-09.
  43. ^ "Red Carpet" (PDF). Northern Rock. 2006. Retrieved 2008-10-02.
  44. ^ "Rock in swing with Ant 'n' Dec". The Journal. 2006-06-01. Retrieved 2008-10-02.
  45. ^ "Have a free go at golf". The Journal. 2007-05-24. Retrieved 2008-10-15.
  46. ^ "Northern Rock bought rugby fields three weeks before crisis". The Daily Telegraph. 2008-02-28. Retrieved 2008-02-28.
  47. ^ "Northumbria University buys Newcastle Falcons' ground". The Journal. 2008-12-04. Retrieved 2008-12-08.
  48. ^ "About Us". Northern Rock Foundation. Retrieved 2007-09-16.
  49. ^ "Northern Rock squeezes out 2 m charity boost". BBC News. 1998-01-28. Retrieved 2007-09-16.
  50. ^ "Top 10 Corporate Foundations". The Guardian. 2007-06-13. Retrieved 2008-02-20.
  51. ^ "Staff". Northern Rock Foundation. Retrieved 2009-01-05.
  52. ^ "Northern Rock plc". HM Treasury. 2008-02-17. Retrieved 2008-09-26.
  53. ^ "Grants totalling £2.2 million announced by Northern Rock Foundation". Northern Rock Foundation. 2008-10. Retrieved 2008-10-10. {{cite web}}: Check date values in: |date= (help)
  54. ^ "New company to manage Government's shareholding in banks". HM Treasury. 2008-11-03. Retrieved 2008-11-03.
  55. ^ "Northern Rock to make 800 compulsory redundancies". The Guardian. 2008-07-31. Retrieved 2008-08-01.
  56. ^ "Northern Rock - Quarter 3 Trading Statement". Northern Rock. 2008-10-14. Retrieved 2008-10-14.
  57. ^ "Commitment to Competitive Framework - Savings Product Changes". Northern Rock. 2008-10-02. Retrieved 2008-10-10.
  58. ^ Budworth, David (2008-10-03). "Northern Rock might have to turn away savers". The Times. {{cite news}}: Text "accessdate-2008-10-05" ignored (help)
  59. ^ "Rock shareholders to stage protest". Press Association. 2009-01-06. Retrieved 2009-01-06.
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55°00′37″N 1°37′34″W / 55.0104°N 1.6260°W / 55.0104; -1.6260

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