ONE of the City’s most experienced bankers, Luqman Arnold, has secretly assembled a crack team to rescue Northern Rock, the stricken mortgage bank.

Arnold is proposing a salvage plan for the Newcastle-based bank which does not involve a sale or break-up. Details of his proposal are expected to be finalised ahead of this Friday’s deadline set by Northern Rock’s advisers for bids to be submitted.

The ambitious plan is believed to have the support of a number of Northern Rock investors, particularly those who have been buying shares in recent weeks. One recent buyer, Philip Richards at RAB Capital, said: “This is a credible solution, with a proven management team.”

The proposal is thought to involve acquiring an equity stake of between 10% and 20%. Arnold would become interim chief executive, replacing Adam Applegarth, who would leave the company.

Arnold’s team would not receive any executive remuneration or fee. Their reward would come from attempting the herculean task of restoring Northern Rock’s share price.

The plan is expected to be well received in northeast England, where the group’s customers remain loyal despite the crisis that has engulfed their local bank.

Arnold is already thought to have sounded out Bryan Sanderson, who has recently been installed as Northern Rock’s chairman. Sanderson is believed to be supportive. Arnold is also understood to have had detailed conversations with the Bank of England, the Financial Services Authority and the Treasury.

He built his City reputation first as chief executive of UBS Warburg, the Swiss investment bank. Then five years ago he was parachuted in to save Abbey, Britain’s fifth-biggest bank, which had fallen on troubled times after a blow-out in its wholesale banking arm. The bank was later sold to Spanish bank Santander.

Since then he and a handful of other professionals have set up a financial-services investment firm called Olivant, which is incorporated in Guernsey. Olivant is backed by a number of wealthy investors.

Arnold, who is being advised by Ken Costa at Lazard, has hand-picked six specialists at Olivant to run the bank, which is capitalised at £743m. They have spent the past month preparing a detailed plan to take control and keep it going as a viable business.

Other than Arnold, the other key members are thought to be Alan Morgan, a former senior partner at McKinsey; Kirk Stephenson, former chief operating officer of Freshfields Bruck-haus Deringer; Brian Keane, a former investment banker with Deutsche Bank; Mitchel Lenson, former group chief information officer at Deutsche Bank; and Peter Strafford, a former senior investment banker at UBS and Goldman Sachs.

Advisers to Northern Rock last week sent out an information memorandum in a bid to widen the net of parties interested in making a bid. So far a consortium led by Sir Richard Branson’s Virgin Group is interested, as are the private-equity firms Cerberus and JC Flowers.

However, there is growing concern within government circles that a protracted sales process could further damage the group’s brand. The Bank of England has so far lent Northern Rock £23 billion.

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