More bad press has come for Northern Rock this week, as it reveals its ex-chief executive remains on his £760,000 a year salary and its business plan will announce job cuts and losses for 2007.
The nationalised bank's ex boss, Adam Applegarth, who left last year amongst accusations of architecting an unstable business model, will remain on his £37,000 a month salary until the end of the year unless he finds another job. However, with such a substantial pay-off and a pension pot of £2.2 million, it is doubtful that the 45 year old will ever need to work again.
Mr Applegarth's payoff will be particularly maddening for the 2,000 Northern Rock staff that will lose their jobs by 2011, as outlined in new chief Ron Sandler's report, expected today; the bank's shareholders, who are expected to be left virtually empty handed, will also feel short-changed in light of Mr Applegarth being seemingly rewarded for his failure.
The report is expected to announce that the bank made a loss in 2007, rather than the £540 million pre-tax profits that were anticipated before the credit crisis broke last summer. The losses can be accounted for by mortgage customers defaulting on their loans, hefty fees owed to City advisors, and the interest payments on its £24 billion loan from the Bank of England, which the Treasury believes will be down to about £14 billion by next March.
The new business plan is thought to outline how much of the bank's future funding will come from retail deposits and how much from wholesale sources; it was Northern Rock's disproportionate reliance upon wholesale funding that led to it running into liquidity problems and the Government's decision to nationalise it last month.
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