Northern Rock confirms job cuts, promises to repay taxpayers
Northern Rock revealed yesterday that it would not break even for 3 years but pledged to repay its £24 billion state loan.
Furthermore, the crisis-torn bank has confirmed it will cut costs by 20% and make 2,000 job cuts. The bank said it is in talks with workers’ unions and is in the process of deciding how and where the cuts would be made.
The bank revealed it made losses of £168 million last year after it was forced to write-down investments by another £422 million. Ron Sandler, the bank’s chairman set out detailed plans to return the bank to break-even within 3 years.
Mr Sandler confirmed it will pay former chief executive, Adam Applegarth, a total of £785,000 as part of his severance agreement.
He added his intention to reduce the bank’s assets, effectively its mortgage book, from its current £107 million to around £50 million by 2011.
Northern Rock hit difficulty last summer after problems in the US housing market prompted a global credit squeeze. Faced with poor market conditions, many banks stopped lending to each other and Northern Rock’s main source of financing dried up.
Consequently, the bank was forced to go to the Bank of England for emergency funding, which prompted a run on the lender.
After rejecting takeover bids from the board of Northern Rock and a consortium led by Sir Richard Branson’s Virgin Group, the Government rushed through legislation to nationalise the bank in February.