Northen Rock [Merged Threads]

purch

And while we're at it Alliance & Leicester's shares have looked a bit icky of late - are they in the same boat or is that just the froth of bid speculation coming off?

Probably...

Any company whose main business is lending secured on a single asset class ( property ) and who need to access funds from the currently ( and IMO will continue to be for quite a while ) illiquid money markets will have to downgrade their profit forecasts...........

DocProc

Correct.

It wouldn't take too long on this site to find about 20 or so better deals than anything Northern Rock are doing for their savers.

Their senior management need to get a better act together.

Quote from our 'Darling' Chancellor:

"....the loan to Northern Rock would be provided at a penal interest rate as a recognition that management at the firm were not without blame....."

isofa

I guess it would be tempting, and certainly worth a punt, if you don't mind the risk (an can afford to loose the money).

The shares are currently just over 500p. However I think they have more to drop yet.

My small share holding in NR has plummeted so I'm obviously not going to sell. Going to tough it out, as I can't turn back the clock and sell in February!

Good coverage of the NR stories and news at ft.com at the moment.

Liz_the_Whizz

What I don't understand here is why the Bank of England is bailing our Northern Rock when this not about protecting NR's existing business, but all about ability to carry on with NEW mortgage lending.

Most people in business (and life) have to learn hard lessons about cash flow. A bank such as Northern Rock should be setting the standard for borrowers, not bringing the whole sector into disrepute by over-reaching itself.

I trust that the Bank of England funds come with strings attached about Northern Rock cutting their coat according to their cloth.

FelOn_2

$$$ wrote: »

So why are they "Open for sub-prime business"?


http://www.northernrock.co.uk/intermediaries/specialist-lending/index.asp

Read to the bottom of the page, NR is only an intermediary

"Northern Rock plc process mortgage applications on behalf of Southern Pacific Mortgage Limited. Mortgages are advanced and administered by Southern Pacific Mortgage Limited.

The Borrower will enter into a legal agreement with Southern Pacific Mortgage Limited.

Southern Pacific Mortgage Limited is Authorised and Regulated by the Financial Services Authority."

dunstonh

Northern Rock is almost like a landlord in the way that it operates. It's business model isnt strong as it is too limited to one area and that area has pressures on it at present.

The share price drop reflects the fact that it's future profits are going to be hit as it cannot borrow money cheaply so future deals from NR are going to be more expensive which means consumers are less likely to choose them as a lender. The share price drop has little to do with solvency as that is not a concern. In fact, Northern Rock could easily become a takeover target as its lending book is quite good and its assets far outweigh its liabilities and the value of the bank has just dropped by 20%. Much more and it could be seen as value.

oshoshitzu

I have over £60,000 in a NR internet savings account. I am considering transfering funds, for now, to Sainsbury's internet account which I have not yet opened. However, just having heard the Chancellor say (pretty much) that NR will not be allowed to go under I am still deciding whether to transfer. The FSA have also said that things are fine. The Bank of England has it would only lend money in cases of genuine stability.

Has anyone had any problems with Sainsbury's internet saving? Is it easy to open and transfer funds immediately?

cm233lh

I just walked past their Moorgate branch. There were TV crews outside interviewing people who were standing in a very long queue out of the door and down the street. I offer no other comment.

Rafter

This is all about confidence and primarily confidence of the banks and investors outside the UK.

House prices and mortgages outstanding in the UK have been growing at a phenomenal rate.

At the same time the level of saving in the UK is at an all time low.

So in order to fund mortgages banks have been borrowing from other banks and investors, mainly outside the uk, in order to keep providing loans.

The rest of the world has quite a lot of £ to lend us to be honest, because the UK has been running a trade deficit for some time.

Now the rest of the world is a bit more nervous about lending to fund mortgages primarily because house prices in the US are in free fall.

Question is are they right? Are we headed for a housing crash and recession in the UK and are banks like Northern Rock fundamentally overstretched?

Personally I don't think so, I won't be selling my house, but I do expect to lose some of the stupid increase in value over the last few years. I couldn't afford to buy my house any more - so why should anyone else be able to, without overstretching themselves?

As consumers, what could we do to make the problem worse?

Well, we could all stop spending and borrowing and try to sell our houses, triggering a crash. We could all withdraw our money and keep it under the bed or buy gold.

And what could we do to make it better?

Pour £35k each into the northern rock maybe so it doesn't have to rely so much on overseas banks maybe? Demand that regulators don't allow banks to lend quite as freely? Demand that all these complex investment vehicles that nobody really understands are outlawed? Demand that hedge funds that effectively invest £1 of investors money and £10 of borrowed money to generate spectacular but very high risk returns are more properly monitored.

Maybe we should also start to be less reliant on the rest of the world for our money, energy, cheap plastic toys and disposable lifestlyes and be a bit more loyal to locally produced goods, drive more economical cars, buy less cheap disposable rubbish toys for our children and maybe then the imbalances that have created the current mess wouldn't be so big?

R.

sikejsudjek

cm233lh wrote: »

I just walked past their Moorgate branch. There were TV crews outside interviewing people who were standing in a very long queue out of the door and down the street. I offer no other comment.

There are many reports comming in of queues outside branches. Its a full scale run on the bank. NR didn't have big deposits to begin with - how long are they going to survive ? Their share price is down 25% or so.