ABS analysts at RBS believe that the planned integration of Northern Rock Asset Management and Bradford & Bingley is unlikely to affect investors in their respective securitisation programmes. As there is no planned integration of the existing mortgage master trusts (Granite and Aire Valley), the two will be kept separate in terms of legal and structural perspectives.

The analysts do believe, however, that concerns exist regarding the servicing of the trusts. "We would argue that servicing quality for the two pools, in particular with regard to delinquency management, would be better optimised if kept distinct. Our second point would be on the long-term (common) management strategy for the trusts, which we of course expect to centre on runoff."

However, the analysts note that this is not a major concern, given that "both Aire Valley and Granite master trust securitisation programmes are already in run-off, with principal payments entirely dependent on principal receipts from mortgage borrowers, therefore leaving investors subject to extension risk".

RBS describes the current performance of each trust, saying: "Granite and Aire Valley master trusts both reported in the last week, with differing results. AIREM saw its arrears continue to improve with losses still low in comparison to many UK prime trusts. Granite in contrast saw total arrears continue to increase, albeit 3m+ arrears were marginally lower. The key improvement was in losses, which declined to £2.2mn in Feb compared to a peak of £14.9mn in Jul 2009 - if sustained, this could see GRAN reporting positive excess spread in the next few months."

Plans to integrate the businesses, operations and management of the companies were announced by the UK Chancellor during his budget speech. The proposed integration would have the two companies remain as separate legal entities, but under a single holding company, with common management and governance. No indication of a timescale for the integration has been given.