Osborne’s Northern Rock sale is just the beginning

The Chancellor is clearly trying to signal the beginning of the end of the financial crisis with his Mansion House speech tonight by proclaiming the sale of Northern Rock. But it’s not all of Northern Rock and we (the taxpayers) won’t make a profit on this chunk.

Bizarre, you might think, when the chunk being sold off is known in the banking/Whitehall jargon as “the good bank” – the bit with post-crash mortgages and current accounts not the older, rotten mortgages.

Even this end of the business is losing money at the moment – £230m in 2010 – and the Government is expected to get back about £1b of the £1.4b it injected. Odd timing, was Alistair Darling’s verdict.

What does that leave on the Government books and might they turn a profit? If so, when?

We put £1.4b into Northern Rock “good bank” but £23b into buying up the older mortgages. These might turn a profit eventually but that depends on when the property market rises up again.

The Government spent £45.2b on RBS (at 50p a share – currently trading at 40p) and £17.4b on Lloyds (at 63p a share – currently trading at 47p).

The Government says it wants to start selling these off in 2012 but external shocks in the Eurozone or a commodities price shock or two could change all that.

There’s also £8.5b of Bradford and Bingley mortgages on the Government books and they definitely wouldn’t sell for the same price right now.

So there’s a wait still and no certainty, but most analysts think that eventually a profit might come.

That’ll depend to some extent on something else that George Osborne is talking about tonight. Financial crises make for choppier, tougher crawl backs than usual cyclical recessions.