N. Rock team fears Virgin name will sway government

By Steve Slater and Clara Ferreira-Marques

But the former investment banker told Reuters his plan to pull back from aggressive lending, halve the asset base and boost retail deposits would bring the bank back to its healthy levels of 2003, before an aggressive lending policy took it to near collapse last year.

Virgin has been seen as the favorite to be picked, as it will inject more capital and rebrand the bank.

"I am not here trying to win a PR battle. I am here to make sure that the facts are right and therefore the perception is right and then people can make the right decision for the bank, the financial community, customers, voters and the taxpayer."

Thompson said he was concerned the public regarded Virgin, a household name thanks to Branson's airline, music and media businesses, as the only genuine private sector solution.

PRE-BUBBLE DAYS

"All we're going to do is return this bank to what it was pre-bubble, to rein in the amount of lending that it does.

Thompson, who joined Northern Rock's board last month and will take over as chief executive if the in-house plan is selected, expects the bank's assets to roughly halve from its pre-crisis level of 113 billion pounds as it intentionally shrinks its mortgage book.

"We can't have a lot of support from the government over the next three years and go out there distorting the market, that has to be wrong," he said.

"That will be a bank that looks, with the size of the assets, very much like it did at the end of 2003."

"This is a new team and a new strategy and one that is properly geared towards a difficult environment," he said.

He said his plans for more constrained growth would be similar to more cautious lending across the mortgage industry, where lenders are feeling the strain of higher borrowing costs and a slowing economy.

Under the plan Northern Rock would raise at least 500 million pounds in a share issue. Thompson said that would include bringing in some long-term institutions, who could expect to see annual returns of over 12 percent.

For a Northern Rock Take a Look click on .

(Additional reporting by Matt Falloon and Mark Potter; Editing by Mark Potter, Andrew Callus and David Cowell)

($1=.5095 Pound)