(click on the chart for a larger image)
Northern Rock is about to jump back into the lending business. After a year or so of trying to pay down its debt to the Bank of England, and shrinking its balance sheet, NRK is going to start growing again.
Nevertheless, it is interesting to see what has happened to the NRK balance sheet over the last year. The bank hasn't become that much smaller. Assets are down only around ₤5 billion. However, the composition of assets has changed dramatically, the proportion of mortgage loans is down, while cash holdings is up sharply.
To a greater or lesser extent, all UK banks have been trying to follow this basic strategy; build up cash balances and get out of the housing market.