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Jezza

Could Northern Rock Retain Its Independence After All?

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I may have missed something like this already said elsewhere on here, in which case, apologies. But….

I have a feeling in my water this morning that Northern Rock may just get away with it – by which I mean, remain largely independent after all. Here’s why:

The share price has stabilised, even bounced back a little. Might be a dead cat, but the haemhorrage of deposits out of the business has, apparently, been staunched (we’ll see how much non “at branch” cash, non on demand money goes in the near future, admittedly).

The reputation of the bank three days ago was toast, to use a word in common use here – but is it still toast today? The talk now is of depositors returning their money and avoiding penalties; the queues at branches have dwindled. Polls suggest the BOE’s guarantee to depositors has done the job Brown-Darling wanted in restoring a measure of confidence in the NR and the banking system in general.

Applegarth and Co are in the business, first and foremost, of protecting and impoving the lot of their shareholders (cue hollow laugh). We know, he knows, everybody knows the old business model is history, but NR is, apparently, still solvent and holding a bundle of, apparently, quality mortgage business which is still putting money in the bank every month.

Is it possible that the NR board will be allowed to try and trade their way out of this crisis and amend their model by increments? The shares, to be mercenary for a moment, might yet look cheap, undervalued and a buy at current levels, the more so as the company will remain a potential bid target for the forseeable. And if the UK follows Uncle Sam and cuts rates soon, is it impossible that the BTLs could knuckle down, ride the rising rentals wave and kick-start the whole show again, at least for anther couple of years?

I could look ridiculous at any moment now (OK, maybe already) and if it’s sold for a quid at lunchtime I’ll shrug, get me coat and move on. Maybe a deal is already all but done; maybe the authorities won’t let NR go without securing human sacrifices – although surely if NR continued, chastenedly, on its way the authorities could claim credit for a rescue that saved the day for everyone. I think it’s just possible.

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