UK Financial Investments said it has agreed to sell 100pc of Northern Rock to Virgin Money for £747m in cash immediately, but this could potentially rise to around £1bn.
Under the deal, another £50m is “expected” to be paid within six months. The Treasury will also benefit by up to £80m if the bank floats in the next five years and retain £150m of Tier 1 capital notes.
Northern Rock, which signalled the start of the financial crisis in Britain when it collapsed in August 2007, is the first bank to be returned to the private sector.
The Newcastle-based lender received a £1.4bn bail-out when it was nationalised in February 2008 at the height of the credit crunch. So on paper, taxpayers end up with a loss of £400m, but this could rise to £650m.
George Osborne said the deal was a “good thing” for taxpayers, consumers and the banking system.