Northern Rocks Share price crashed by 30% today as the mortgage bank sought emergency funds from the Bank of England due to the credit freeze in the interbank money market which Northern Rock heavily relies upon. Panic gripped savers forming long lines outside Northern Rock Branches throughout the UK to withdraw funds. Investors dumping the stock on the market open where even unsubstantiated rumors of takeovers and white knights failed to halt the crash in the banks share price.
In our pre-market open article we warned about possible 'blood on the street' for Northern Rock stock holders as there was a high risk of a run on the bank as panicking depositors sought to withdraw savings. This is what has subsequently transpired. Northern Rock Bank Seeks Emergency Cash From The Bank of England
Northern Rock is Britain's fifth largest mortgage bank, and the Bank of England deemed it necessary for Britain's economic stability to come to its rescue by offering the mortgage bank an open ended line of credit for the duration of the current liquidity crisis, which is set to continue well into 2008. The amount of the funding has not been specified but is estimated at more than £4 billion ($8 billion).
Northern Rock also issued a profits warning, that its profits for this year will be £147 million lower than expected. A run on the Northern Rock bank is expected to continue during the weekend as depositors make panic withdrawals, ignoring the Bank of England's emergency funding of the bank.
Article originally published on 14th September 2007
By Nadeem Walayat, Editor
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