During a Treasury Select Committee hearing this morning involving the heads of three bailed-out banks, Royal Bank of Scotland (RBS) Northern Rock and LBG, Daniels said the scale which the combined entity will have will benefit cutomers and employees.

He said: “For our customers, we will be able to invest more, for our employees, they will be able to build broader careers, and for our shareholders, hopefully we’ll make good returns for them so I believe it will be a good deal.”

He continued: “I do not believe that anyone was hoodwinked. We believe this was good for, not only Lloyds shareholders and other stakeholders, but we also believe it was a good thing for the wider banking system. If HBOS had gone down, it would have had much more serious consequences than the current crisis that we are experiencing.”

Gary Hoffman, chief executive of Northern Rock, said the arrears rate in Northern Rock Asset Management was 4.11% in Northern Rock and said that the performance in 2009 will be substantially better than the £1.4 bn loss in 2008.

He said: “Although loss making, I think we will show very encouraging results when we announce in March. I think because Northern Rock Plc is very well capitalised and very liquid it will make attractive returns in due course to a potential private owner.”

Sponsored

£2.5m paid to help broker clients benefit from greener homes

Sponsored by Halifax Intermediaries

Hoffman added that two in every three properties repossessed by Northern Rock were financed by one of its Together Mortgages, which allowed borrowers to take on mortgage loans worth up to 125% of the value of the property.

Hoffman told MPs: “I need to be clear that we would expect arrears to be that high given what the book is. We have talked before about Together; Together arrears are 6.89% so it is Together that is driving that. Together is a third of the book, half of the arrears, and it’s two thirds of repossessions.”

He told the Treasury Select Committee that 90% of the mortgage accounts held in the new Northern Rock Asset Management are now performing well.

He said: “It’s not a bad bank. We are happy for those people to keep their mortgages with Northern Rock. It may not be the cheapest but it is not the most expensive.”
Stephen Hester, chief executive of RBS, said it would be unlikely for RBS to call upon the Asset Protection Scheme (APS).

“The world looks a bit less gloomy today than it did in February when the APS was conceived and also RBS’ far-reaching restructuring has begun to pay off as well. It is there as sort of a rainy day scheme whereas when it was first conceived it looked likely that we would need it,” he said.