In its eagerly-awaited results statement this morning, the Rock’s new boss Ron Sandler said that the bank would take three years to repay the £24bn of taxpayers’ money it’s been loaned by the Treasury – after which he hopes to be able to flog it back to the private sector. Apparently the Rock made a pre-tax loss of £168m last year, thanks largely to its dodgy US sub-prime exposure, and it’s expected to remain firmly in the red as long as it’s in government hands.
The Rock also came clean about the payments it’s been making over the last few months, as it slid inexorably towards nationalisation. Most controversial will be a severance payment of nearly £800,000 to former chief executive Adam Applegarth, the man who led the Rock into its current parlous state. Admittedly the pay-off was agreed in December, when a private sale still looked possible, and it’s actually less than he was due – but it’s bound to provoke more accusations of ‘rewards for failure’. And to be fair, Applegarth is going to walk away with a bank balance that looks a lot healthier than all of the shareholders whose interests he was supposedly safeguarding.
Almost as shocking, though, is the amount of cash the Rock has shelled out to City firms in the six months since it got into trouble. In effect, the attempt to prevent nationalisation cost it almost £50m in advisory fees to lawyers, bankers, PR advisors and various other consultants – proving that in the City, even the blackest of clouds has a very silver lining. Again, this isn’t likely to improve its reputation among the population as a whole – if you’re under the impression that City firms are heartless parasites, this is unlikely to convince you otherwise.
The latest news from the Rock wasn’t actually all bad – taking out exceptional items (i.e. all the one-off credit crunch stuff) it made a profit of over £400m for the year, so it’s not completely decrepit. And its mortgage default rate is still lower than the industry average, which seems to confirm its claim that it’s got a better-quality book than most of its rivals.
But that’s unlikely to appease its disgruntled shareholders, not to mention the 2,000 Rock employees who are set to lose their jobs. And those City advisors can’t afford to get too cocky either – according to the CBI today, 11,000 of them are going to get the chop between now and June.
So all in all, we doubt Sandler is expecting us to be jumping for joy at the prospect of getting our £24bn back...