JC Flowers, the American private equity firm, has set aside a £1.5bn "war chest" to buy mortgage books from British banks after failing to purchase Northern Rock.
The US firm, founded and run by former Goldman Sachs banker Christopher Flowers, is to move to what one source called its "Plan B" for the UK market after it lost out to Virgin Money in the £1bn auction for the state-owned bank, according to the Daily Telegraph.
The move also follows its failure to secure the purchase of Principality, the UK's seventh largest building society, which it had hoped to merge into its OneSavings Bank vehicle, which was formed from its acquisition of the Kent Reliance Building Society last year.
Rather than buy mutuals, which to date has not proven to be a successful model for growth, the firm is opting to buy books of mortgages - essentially bundles of hundreds and thousands of residential loans - in what another banking source likened to the way in which Resolution buys up "zombie" pension funds.
The financial firm is already understood to be in discussions with a number of banks about buying books of mortgages, ranging from tens of millions to hundreds of millions of pounds. The assets will be transferred into OneSavings, which is the firm's primary UK vehicle.
Annuity market worth £4bn in 2017
For ‘distress’ caused
Oversees £30bn of advised and D2C assets
Less than a third of top paid employees are women
£1bn business since inception