The media thinking Tesco and Virgin are on the hunt for embattled public bank Northern Rock. Virgin has tried before of course and Tesco’s name has been cropping up of late as an interested buyer, adding to its move into retail banking proper.

The stories are growing in credence after leaks surfaced that the Government intend to way goodbye to the Northern Rock before the general election sometime before May 2010. Ministers want it back in public ownership before they go to the country and fight for their political lives.

But the two top brands might not have it all their own way, with many of the larger private equity funds said to be running their own slide rules over the Rock.

Tesco and Virgin remain tight lipped, preferring to stay mum over whether the Rock would make a good fit for their respective businesses.

Last year the Rock made a neat £1.5 million loss of provisioning for £1.15 billion of bad debts.

There has also been talk of the Financial Services Association (FSA) looking the other way when it comes to Northern Rock’s capital requirements. Claims have been made that the Rock is in breach of its capital requirements due to a loss of £500 million in the last six months.

This breach technically means it should not write new mortgages, or continue to manage existing mortgages.

And this is not the first time the FSA has obligingly turned a blind eye to the Rock’s precarious position. Last year they allowed the public bank to use tier two capital (a less secure form of financial reserve) to meet the regulatory requirements.

Now it appears that the Rock has admitted that it’s capital base has been: “…reduced to a level below its minimum regulatory capital requirement.” But went onto say that “…the FSA has confirmed that it does not currently intend to restrict the activities of the company while the plan is implemented to address its capital position.”

The plan referred to involves converting £3 billion of the taxpayer’s £14 billion loan into equity. A common debt for equity tactic that struggling companies use to stay afloat. To make such a move, the Rock will need to get state aid clearance from the European Commission.

But the Rock has a further trick up its sleeve in order to fully shake off the past.

Effectively two banks will be created. The first, a good bank, will enjoy the £10 billion of good loans, the branch network and deposits. A bad bank will get whats left: all the bad loans and similar detritus.

And it’s the good Rock bank of course that the likes of Tesco and Virgin are thinking of buying. The bad Rock bank looks likely to have very few fans of course.

Guest Article by Neil Camp

Tesco continues its push to become a major personal finance player with a major offer on its credit card.

The Tesco Personal Finance Clubcard credit card has extended its 0% interest deal on purchases from six to 12 months. It is only available to new customers though and starts when the new credit card account is opened.

At 2%, the Tesco credit card already boasts one of the most competitive balance transfer rates. It also offers 0% interest for six months on the balance transfer.

Commentators have noted that competitors have had to be equally generous, with Virgin credit card responding to Tesco’s inroad with 0% on balance transfers for 16 months.

Although Virgin is unable to beat Tesco’s offer of five Clubcard points for every £4 spent in their superstore.

Although a relative newcomer to the sector, Tesco Personal Finance is now ranked as the U.K.’s eighth largest credit card provider. Tesco has already announced its intention to operate banking facilities within its stores and hopes to offer customers current accounts later on in the year.

Guest Article by Neil Camp

Hot on the heels of high-street grocer Tesco comes another well known brand determined to attract disgruntled customers from the shamed banks.

Media reports claim that Virgin Money, which was originally launched in 1995, is set to ask the Financial Services Authority for a full banking licence. This would allow it to offer mortgages and take deposits, which is one step up from its current product package of insurance, credit cards, loans and saving schemes.

With its two million plus customers, Virgin Money is the financial services division of Richard Branson’s Virgin empire.

Virgin Money’s last results showed that in 2008 sales increased from £70 million to some £100 million, with profits at around £30 million.

Virgin Money is following in the footsteps of retailing giant Tesco which has already committed over a £1 billion to establish a major banking prescence through the U.K. And there are sure to be more joining the hunt for customers who blame the high street banks for much of the world global downturn.

Tesco Personal Finance has already taken complete control of the joint venture it shared with the RBS Bank and has set out its stall with plans to open 30 in-store financial outlets throughout 2009.

Boots is rumoured to be another retailer that is about to take the plunge into banking proper (in other words, offering accounts and mortgages). Most of the U.K.’s big retailers already offer an array of personal finance products.

Virgin Money was formerly mooted as a buyer of the troubled bank Northern Rock and that remains one of three options for Branson. He could also choose to create a completely new bank with a high-street and internet prescence, or get together with an existing financial institution.

Virgin Money is said to be in talks with a U.S. investment bank about funding options.

Guest Article by Neil Camp