Bank of England to prop up Northern Rock

Quote from dhpar:

Cdntrader, do you think it is necessary to re-post all news from the web? Links would suffice. Also I believe ET users can write NRK into google themselves. On top of that your news selection seems to have a particular bias :)
I hope you had a stop in place for that Yen trade - it now looks like one of the worst calls I ever saw on ET - well over 100pips in the red in relatively calm markets...

p.s. I will take my chances here again - bought 2000 shares at 510p (all-in cost basis). Let's hope I will not beat your Yen trade - I am already down :D
More...


i'm to dense to trade currencies.Sorry:)
 
Customers Ignore Northern Rock's Plea

Northern Rock (LSE: NRK.L - news) customers appear to be ignoring the bank's call to stay calm over fears of its financial future. Customers (Advertisement)

have been queuing at a number of branches to withdraw their money from the cash-strapped bank.

The queue at a branch in Newcastle and one on the City of London (LSE: CIN.L - news) stretched outside onto the street.

Savers are concerned for their investments following the news that Northern Rock has called on emergency funding from the Bank of England to help it through the credit market crisis.

"I'm not sure about this, even though they say it is going to be all right. If they are short of funds, what happens to our funds?" said one customer.

Another customer, a pensioner, said she was withdrawing all her savings.

Another woman, who was with her husband, admitted she was worried, adding: "I want to spend my money before someone else does."

People in the queue burst out laughing when one staff member asked them: "Does anyone want to pay money in?"

Northern Rock - the UK's fifth-largest mortgage lender - turned to the Bank of England as the "lender of last resort" after it ran into trouble raising cash from the commercial markets.

It wants the cash so it can continue to lend it out to customers. Although it has not yet taken the money from the BoE, it has the facility to take it if required.

The Newcastle-based company holds deposits of £24bn from 1.5 million savers and lends to 800,000 homeowners.

There has been widespread volatility on the international markets amid fears that banks may have to write off large quantities of bad debt held in US mortgages.

Shares in Northern Rock plummeted more than 25% at one stage after it confirmed it had applied to the BoE.

The mortgage lender also admitted its profits for 2007 might be £150m lower than expected.
 
People are have been withdrawing funds like crazy...
People were still there an hour after Northern Rocks usual friday close at the towns local branch...

The BBC's snap shot sums up things ...:eek:
 

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Quote from Mup:

People are have been withdrawing funds like crazy...
People were still there an hour after Northern Rocks usual friday close at the towns local branch...

The BBC's snap shot sums up things ...:eek:
More...


over 2 billion pulled out so far.


Northern Rock Experiences Second Day of Customer Withdrawals

By Sarah Thompson

Sept. 15 (Bloomberg) -- Northern Rock Plc branches around the U.K. had lines of customers stretching outside their doors seeking to withdraw deposits for a second day after the Bank of England authorized emergency funding to the mortgage lender.

Bank clients stood in lines that extended for a few hundred feet outside branches in Kingston and Sheffield in England and Edinburgh in Scotland, images broadcast today by the British Broadcasting Corp. and Sky News showed.

``What price is loyalty,'' said Nancy MacDougall, a Northern Rock customer interviewed by Sky News outside an Edinburgh branch. The situation ``is a worry. My pension goes in here,'' she said.

Asked why she had joined the line to get into the bank, she said: ``I hadn't intended to, but the panic sets in.''

Customers withdrew 1 billion pounds ($2 billion) from Newcastle-based Northern Rock yesterday, the Financial Times reported today, citing an unidentified person close to the situation. Northern Rock shares plunged 31 percent to a six-year low yesterday after the company said the British central bank will provide it with an unspecified amount of credit.

About 250 million pounds was withdrawn from Northern branches yesterday and the remainder transferred via the bank's Web site, the Financial Times said. The total figure equates to about 4 percent of the bank's deposit base, the FT said.

Kingston Branch

Northern Rock will pay a penalty interest rate of close to 7 percent to borrow funds from the Bank of England, the Guardian newspaper reported today, without citing anyone for the information. U.K. Chancellor of the Exchequer Alistair Darling authorized the emergency lending, saying the Bank of England will step in as the lender of last resort ``where institutions face short-term liquidity difficulties.''

Northern Rock, whose roots date back to 1850, is the U.K.'s third-biggest lender by gross mortgages with loans worth 17.4 billion pounds as of June 30.

Customers at the Kingston branch, southwest of London began lining up as early as 6 a.m., Sky News reported. The branch had stayed open late last night.

One customer who identified himself only as Tony said he was walking past just to see ``what the lines were like.'' He said his money was ``perfectly safe'' and ``people didn't need to panic.''

The Kingston branch normally stays open until midday on Saturdays. Today, it planned to stay open for one hour longer, Sky reported.

A mobile billboard advertising a suicide prevention counseling service was parked in front of the Edinburgh branch, Sky News showed.

A voicemail message left on the cellphone of Northern Rock spokesman Don Hunter by Bloomberg News today wasn't immediately returned. A call to the bank's press office today outside of office hours wasn't answered.

To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net .

Last Updated: September 15, 2007 07:15 EDT
 
now 4 billion..8% of deposits.



Northern Rock Remains `Solvent,' U.K. Chancellor Says (Update2)

By Tracy Alloway

Sept. 16 (Bloomberg) -- Northern Rock Plc is ``solvent,'' U.K. Chancellor of the Exchequer Alistair Darling said today, as the chief executive of the mortgage lender reportedly appealed for a takeover offer.

Customers have withdrawn at least 2 billion pounds ($4 billion), about 8 percent of retail deposits, since the Bank of England agreed to provide Northern Rock with emergency funding two days ago, the British Broadcasting Corp. said today, citing no one. More money may go this week as almost 10 billion pounds is held by customers with postal accounts, who can withdraw funds only by writing to the bank, the Sunday Times said.

The lender's 100 billion-pound portfolio may be broken up between major U.K. banks, the Sunday Telegraph said, citing unidentified people close to the Newcastle-based bank. Possible buyers include HSBC Holdings Plc, Lloyds TSB Group Plc, Barclays Plc, Royal Bank of Scotland Group Plc and HBOS Plc, it said.

Northern Rock is ``able to carry on trading with the support of the Bank of England and that ought to give people confidence,'' Darling said today in an interview with Sky News, citing both the Bank of England and the U.K. Financial Services Authority.

Customers have lined up outside Northern Rock branches around Britain to withdraw money in the last two days, some waiting as long as six hours. Police have helped maintain order in the queues.

Merrill Lynch

Northern Rock's adviser Merrill Lynch & Co. has been in talks with the board about a possible break up over the weekend, the Telegraph said.

``We don't comment on market speculation,'' Don Hunter, a spokesman for Northern Rock, told Bloomberg News today when asked about the Telegraph report the lender may be broken up and the BBC report on customer withdrawals. Merrill Lynch spokesman Jezz Farr was not immediately able to comment and a Bank of England spokesman declined to comment.

Rising credit costs left Northern Rock unable to make new loans, sparking the first rescue of a U.K. lender by the central bank in 34 years. The bailout stoked concern among investors and depositors that other financial firms relying on short-term credit rather than deposits may be vulnerable because the rate they borrow at exceeds the amount they earn from lending.

`Short-Term Funds'

``Northern Rock had a business model that depended on them being able to get short-term funds,'' Darling said today. The Bank of England ``stands ready to offer support if any one else has similar sort of difficulties.''

Northern Rock gets 73 percent of its funding from wholesale markets rather than customer deposits, higher than its major rivals. Shares of the company, the U.K.'s worst-performing bank stock this year, fell 31 percent on Sept. 14, when it announced the central bank's rescue offer.

It would be a ``long slog'' for Northern Rock to remain independent after the bailout and decline in its share price, Northern Rock Chief Executive Officer Adam Applegarth told the Sunday Telegraph in an interview today. The bank's business model isn't viable any longer because of its dependence on wholesale funding, Applegarth said, according to the Telegraph.

Northern Rock asked Lloyds TSB to mount a rescue takeover, the Sunday Times reported, without saying where it got the information. The two banks had detailed talks, though the Bank of England and the Financial Services Authority ultimately blocked the deal, the newspaper said.

Lloyds TSB spokesman Emile Abu-Shakra declined to comment on the report, saying the bank never discusses market speculation.

Penalty Interest Rate

Northern Rock will pay a penalty interest rate of close to 7 percent to borrow funds from the Bank of England, the Guardian newspaper reported yesterday, without citing anyone. Darling authorized the emergency funding, saying the Bank of England will step in as the lender of last resort. The terms of the facility haven't been disclosed.

The Bank of England hasn't had to bankroll a U.K. lender since the 1973 collapse of Cedar Holdings, a pioneer of second mortgages, triggered a crisis of confidence that threatened to unravel the banking system. That rescue cost about 3 billion pounds, with the central bank providing about 100 million pounds.

The Bank of England stepped in as commercial banks have become reluctant to lend to each other. The European Central Bank has loaned cash to banks in seven special auctions since Aug. 9. The U.S. Federal Reserve cut its discount interest rate and abandoned its bias toward fighting inflation.

Global Credit Crunch

A global credit crunch ``has hit America and Germany harder than it's hit us,'' Darling said. ``Because we have a fundamentally strong economy, because our banking system is much stronger than it ever was in the past, there have been shocks in the past, there will be difficulties in the future, but we can deal with those.''

At least 16 U.S. lenders have been forced into bankruptcy since investors shunned adjustable-rate and subprime mortgages. Germany's Landesbank Sachsen Girozentrale and IKB Deutsche Industriebank AG are getting emergency bailouts after losses from asset-backed securities. Bear Stearns & Co., Goldman Sachs Group Inc. and Barclays Plc are among firms that have stepped in to prop up investment funds in the past three months.

Northern Rock had retail deposits of 24.4 billion pounds as of June 30, according to its Web site.
 
Quote from dhpar:

Cdntrader, do you think it is necessary to re-post all news from the web? Links would suffice. Also I believe ET users can write NRK into google themselves. On top of that your news selection seems to have a particular bias :)
I hope you had a stop in place for that Yen trade - it now looks like one of the worst calls I ever saw on ET - well over 100pips in the red in relatively calm markets...

p.s. I will take my chances here again - bought 2000 shares at 510p (all-in cost basis). Let's hope I will not beat your Yen trade - I am already down :D
More...
Ouch!

Looks like investors and savers alike have been reading the same reports.

One to steer clear of right now I suggest. Picking bottoms is a risky business :D

abc1
 
I am still in - it will see some bounce tomorrow. not very good trade though - timing wrong by 1 day...but I knew it was very risky.
fortunatelly my short notes bailed it out more than handsomely.
 
Quote from dhpar:

I am still in - it will see some bounce tomorrow. not very good trade though - timing wrong by 1 day...but I knew it was very risky.
fortunatelly my short notes bailed it out more than handsomely.
More...

It has. Good luck with your trade.

abc1
 
excerpt: "Until last week, almost nobody in the markets had heard of Northern Rock PLC"

and on Monday this guy is an expert on the whole english banking system. typical.
 
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