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Loans not cheap for the Rock
Northern Rock continues it's daily infiltration of the news channels and today it's there on two accounts that merit headlines.
Firstly the Treasury has decided to extend it's protection of the company's depositors which had expired on September 19th and at the same time continued the availability of the funding facility which helped stabilise the firm in the crisis period last month.
The insurance facility afforded to the company comes at a cost of around £50m in costs for the work done by the Treasury, the Bank of England and the Financial Services Authority.
But that only protects the savings arm of the company, not the division, I suspect, that makes much of it's revenue stream. That cash comes typically from it's lending of loans and mortgages and the difficulty the firm will have now in securing affordable loans funds on the money markets is bound to make it's consumer offerings far from competitive, although yesterday when we looked they were still offering some of the cheapest loans in the comparison league tables, but only for a specific type of borrower - ie the very low risk ones. The company it unlikely to return to previous levels of lending profitability if it has to restrict it's products to a limited type of low risk personal loans.
The firm has already borrowed around £11 billion pounds from the Bank of England and is likely to need a further loan of around £10 billion as some of it's previous money sources come up for renewal. Unless of course it can secure ithe money from other sources as has been suggested by the interest of two investment sources.
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