TSB hopes to buy some of Northern Rock's most toxic loans
TSB, which is now owned by Banco Sabadell, is among a consortium of investors, led by Morgan Stanley, over purchasing some of Northern Rock's most toxic loans, which were absorbed into the UK government's 'bad bank" during the financial crisis.

Risky assets: TSB is hoping to buy some of Northern Rock's most toxic loans

TSB is hoping to buy some of Northern Rock’s most toxic loans which were swallowed up by the Government’s ‘bad bank’ during the financial crisis.

The challenger bank – now owned by Spain’s Sabadell – is thought to be in discussions with a consortium of investors, led by Morgan Stanley, which has mounted a successful bid for the £12bn ‘Granite’ portfolio.

Granite was a complex financing vehicle set up by Northern Rock to raise money on the financial markets before it collapsed during the financial crisis.

The huge portfolio of securitised mortgages is run by UK Asset Resolution, which was set up by the government to run the most risky assets of Northern Rock and nationalised Bradford & Bingley that noone else wanted to buy.

The ‘good part’ of Northern Rock, including less risky loans and branches, was sold to Virgin Money. But the Granite portfolio – which included the risky 125 per cent Together loans – is now paying healthy returns as the economy has improved and less people have defaulted on their mortgages.

Another consortium including Royal Bank of Scotland and Goldman Sachs has been competing to buy the loan book.