TSB’s £3bn Northern Rock deal

THE boss of challenger bank TSB said its decision to snap up £3.3bn of former Northern Rock mortgages will help it ‘break the stranglehold’ of the High Street giants.

The Government announced it had sold a £13bn book of loans issued by the Newcastle-based lender before it collapsed in September 2007. Loans of 125,000 customers were bought by US private equity firm Cerberus, which immediately sold a large chunk to TSB.

The deal gives TSB 34,000 new customers and added firepower as it tries to take on the ‘big five’ of Lloyds, Barclays, Royal Bank of Scotland, HSBC, and Santander.

TSB’s chief executive Paul Pester said it would also make a £300m profit from the book of mortgages.

These loans were considered toxic when Northern Rock collapsed, however, they have become highly sought-after by investors as the economy has recovered and customers have been able to keep up with their repayments.

Pester said: ‘We will be investing that [the profits] in trying to break the stranglehold of banks which have been providing such a poor service.’

The Government described the deal with Cerberus as the biggest ever sale of financial assets by a European government.

Chancellor George Osborne said the transaction– which generated a £280m profit – meant that taxpayers are on course to make a big profit from the rescue of Northern Rock.