Banquo's Ghost

Much like Banquo's ghost, Northern Rock continues to haunt the government.

Northern Rock, having sold excessively expensive and outsized mortgages to those who could least afford to manage them, is now attempting to repossess the homes of those who have failed to keep up with the payments on these most unsuitable of products.

Research published by Standard & Poor shows that Northern Rock has been responsible for one in 13 repossessions in the UK in the second quarter of this year, as its customers are getting into trouble much faster than other borrowers.

Standard & Poor's research shows that a monthly average of 353 of "The Wreck's" best borrowers faced repossession in the second quarter, up from 134 in the previous three months.

S&P also noted an increase in Northern Rock borrowers falling more than 90 days behind on their repayments.

This of course indicates that the loan book may not be as healthy as the government would have had us believe when it made the taxpayer responsible for bailing out this failed firm.

Lib Dem Treasury spokesman Vince Cable accused Northern Rock of being very aggressive in dealing with repossessions, after granting mortgages worth more than the value of properties.

He is quoted in The Journal:

"Northern Rock have been particularly ruthless in repossessions because they have got a lot of 125% Together mortgages which were completely mad at the time and even madder now."

The man who oversaw Northern Rock's grab for customers, and pushed for an aggressive lending policy that has failed the company and its customers, has done rather well for himself though.

Adam Applegarth, ex CEO, was allowed to leave with over £1M in bonuses and pension top-ups and is currently still receiving over £60K per month.

Nice work if you can get it!

Read More

Northern Wreck

Northern Rock warned that it will be "significantly loss-making" this year and would not make break-even until 2011.

It reported a £168M pre-tax loss for 2007.

In 2006 it made a profit of £627M.

The previous board of directors are to be "congratulated" for destroying this bank.

Where are they now?

Adam Applegarth, the chief executive who led it to destruction, will make £760,000 for the termination of his contract. He will also qualify for a company pension, worth £2.2M, in 10 years. He also gets a staff discount on £75,000 of the mortgage on his home.

Bryan Sanderson, Chairman from October to February, will be paid his £315,000 annual salary and £85,000 office expenses until his fixed contract expires in October 2009.

So well deserving!

Unsurprisingly, Applegarth is now being offered police protection; this costs £10K a year.

Read More

Bloodbath at The Rock

After weeks of mounting pressure, following the destruction of Northern Rock, the CEO (Adam Applegarth) has finally been persuaded to fall on his sword and resign.

Applegarth will leave by the end of January.

His is not the only head to role in this debacle, that has seen not only a major brand/bank destroyed, but the first run on a British bank in 140 years (thus severely damaging the credibility of Britain's financial system and that of the regulatory authorities).

Matt Ridley, the much maligned and invisible chairman, resigned in October; the bank has now announced that four non-executive directors - Sir Derek Wanless, Nichola Pease, Adam Fenwick and Rosemary Radcliffe - will step down with immediate effect.

Applegarth earned £1.36M last year. Northern Rock refused to comment on whether Applegarth would receive a compensation package when he leaves the business. The more pertinent question is whether they actually would have the funds to be able to pay him.

Rock also stated that three further directors - David Baker, Keith Currie and Andy Kuipers - would step down from the board, although they would remain officers of the company.

A complete shambles, and a humiliation for Britain's financial services industry and regulatory regime.

What other horrors are lurking in the woodwork in other banks I wonder?

Read More

Northern Rock's Directors Face Grilling

Top executives from Northern Rock are currently being grilled by MPs at the Treasury Select Committee. Chief executive Adam Applegarth, Chairman Matt Ridley, non-executive directors Sir Ian Gibson (who is also deputy chairman of Morrisons and chairman Trinity Media) and Sir Derek Wanless are are among those who are facing the committee.

Committee deputy chairman Michael Fallon kicked off the proceedings, setting the tone, with a cutting question as to whether the hapless directors actually "know what's happening at their own bank".

Seemingly the directors are employing the tactic of blaming "unexpected events". Maybe they should have taken Prime Minister Macmillan's comments many years ago, as to what knocks governments off course ("events dear boy"), to heart.

On being pressed by Fallon as to why no one has resigned, Ridley said that his resignation is there if the board wants it.

Well, what's stopping them accepting it?

It is going to be a long day for these hapless directors!

Read More