Northern Rock was a building society (i.e. a mutually owned savings and mortgage bank)
until its decision to go public and float its shares on the stock market in 1997. As with
other building societies in the UK, Northern Rock traced its origin to the mutual
movement of the 19th century, arising out of the merger of the Northern Counties
Permanent Building Society (established in 1850) and the Rock Building Society
(established in 1865). Even its name, “Northern Rock” conjured up associations of dour
solidity, which seemed appropriate for a savings and mortgage bank.
As with other UK building societies, Northern Rock started life as a regionally based
institution, serving its local clientele. In Northern Rock’s case its base was the North
East of England, around the city of Newcastle upon Tyne. Northern Rock’s successes as
a bank made it emblematic of the revitalization of the North East region following the
decline of traditional industries, such as coal mining and shipbuilding. Northern Rock
funded a highly visible charitable trust, and becoming the main sponsor to the local
football (soccer) team, Newcastle United, known for its loyal fan base. For all these
reasons, Northern Rock commanded fierce loyalty in its local base.
In spite of its modest origins, Northern Rock had larger ambitions. In the nine years
from June 1998 (the first year after demutualization) to June 2007 (on the eve of its
crisis), Northern Rock’s total assets grew from 17.4 billion pounds to 113.5 billion
pounds. This growth in assets corresponds to a constant equivalent annual growth rate of
23.2%, a very rapid rate of growth by any standards. By the eve of its crisis, Northern
Rock was the fifth largest bank in the UK by mortgage assets.