Northern Rock shares in new slide
http://news.bbc.co.uk/go/rss/-/1/hi/business/7084571.stm Version 0 of 1. Northern Rock shares fell as much as 12% in early London trade after a report that savers had withdrawn £10.5bn from the stricken bank. This is almost half the £25bn it had in its deposit accounts before approaching the Bank of England for emergency cash, the Daily Telegraph said. The figure was allegedly in documents sent to potential suitors, which the newspaper claims to have seen. Northern Rock declined to comment. Its shares pared most of its losses later. Shares in the troubled bank were trading down almost 2% at 149p at 1100 GMT. Key asset Northern Rock's savings business is small fry compared with its mortgage operations, which generated the bulk of the bank's earnings. But now, the money in its saving accounts represents a key asset to the troubled lender which, the BBC learned earlier this month, could end up borrowing as much as £30bn by the end of this year to finance its mortgage operations. The rapid pace at which customers are closing their accounts and switching to other High Street banks and building societies could represent another difficulty for possible bidders. Proposals must be tabled by next Friday, according to the Daily Telegraph. Loan guarantee US private equity firm JC Flowers is likely to bid, having put together a high-profile management team to take charge if it is successful, while Virgin has strongly indicated its interest. Asian investors, including Industrial and Commercial Bank of China, are also being targeted by the bank's advisors in an effort to get the best deal, according to the Financial Times. It is unlikely any will be interested without a guarantee that the government-backed loan will remain in place. The government guaranteed Northern Rock's deposits and loans shortly after it was forced to go to the Bank of England for support in September. A sharp decline in inter-bank lending, prompted by financial institutions' fears about their peers' level fo exposure to sub-prime losses, meant that Northern Rock's main source of funding had dried up. This caused the first run on a bank in Britain in living memory and the government was forced to step in to win back investor confidence. |