One of my worst investments in recent years is Northern Rock. No, not the shares, which collapsed so quickly that even the bargain-hunters hardly had time to get in, but the splendidly-named Northern Rock 12.625% Perpetual Subordinated Unsecured cumulative loan stock. At least that’s what it was called at the time. It had metamorphosed from the Permanent Interest-Bearing Shares of the old Northern Rock Building Society, and at £80% it looked like a bargain.

It wasn’t. The Crock was butchered by UKFI. I got a couple of fat coupons, then everything stopped and the price collapsed to around £20%. The prime cuts of Northern Rock have since been sold to Richard Branson (he’s mostly using other people’s money, as usual) so you’d expect the rest to be offal and some mechanically recovered mortgages.

Yet as the FT’s Charlene Goff points out the carcase of Northern, plus that of Bradford & Bingley, have delivered a £300 million book profit to HMG, following a tender for some of these old securities which closed this week. The sale to Branson incurred a loss, so the bad bank has been a better bet for the taxpayer than the good one.

So far, it’s not been a great bet for me. The 12.625% were not in the tender process; a year ago UKFI had generously offered £33%, alongside such gloomy warnings about the future that I decided to hold on. Since then UKFI’s Keith Morgan has done a fine job paying down the government’s £20 billion rescue loan, and working through the £80 billion of mortgages. He announced his departure this week. Yet banking is a funny business, and patience may well be rewarded. I don’t expect to see par on my holding any time soon, but the price has recovered to £46%, and I’m not selling.

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