Northern Rock shares plunge 31%, Paragon Group drops 17%

Northern Rock shares plunge 31%

news.bbc.co.uk

Shares in one of the UK's largest mortgage lenders, Northern Rock, were down by 31% after the Bank of England decided to offer it emergency funding.

But experts say it does not mean Northern Rock, which has £113bn in assets, is in danger of going bust.

(visit the link for the full news article)

[edit]

Title changed to match the current share drop.

Another edit to cover the post in thread showing mortgage group, Paragon group, dropped 17% today (was 26% at one point)

Shares in UK buy-to-let mortgage lender Paragon Group slumped as much as 26% as fears deepened over the ability of banks to finance their loans.

Paragon Group drops 26%


[edit on 14-9-2007 by infinite]

Also today, this has happened;

Credit crunch "may hit" UK economy
Pound hits 14 month low against Euro

This is VERY serious, the Bank of England and the UK Treasury has put funds aside on fears more lenders will need emergency funding.

Recession is the hot word now in the UK.

news.bbc.co.uk
(visit the link for the full news article)

Consumers are reportedly trying to withdraw all their money from Northern Rock.

Fears the mortgage lender could go bankrupt now.

Check out the latest pictures of people waiting outside the branches



Customers are in panic and removing all their money from Northern Rock

Share price has dropped 25% now

The whole thing is ridiculous.

Northern Rock has sufficient assets, The BoE wouldnt have loaned it the cash if it didnt, its just leant out a lot of money and is short of physical cash.

Originally posted by ChorltonNorthern Rock has sufficient assets, The BoE wouldnt have loaned it the cash if it didnt, its just leant out a lot of money and is short of physical cash.

Judging by those lines, they're going to be a little bit shorter on physical cash by the end of the day. :shk:

How long are loans going to be able to continue to keep the market afloat before it all goes down the tubes?

[edit on 9/14/07 by niteboy82]

reply to post by niteboy82


Well yes I agree with you, but people see the headlines in the paper and on the news and panic.
Northern Rock is a quite solvent company.
As stated, the Bof E wouldnt have dished out money to it, if it didnt have the assets to back up the loans.

Originally posted by niteboy82
Judging by those lines, they're going to be a little bit shorter on physical cash by the end of the day. :shk:

Exactly,
I wouldn't believe the sweet words of politicians. This is quite serious. The last bank that had to be bailed out by the Bank of England was the 1970s.

How long are loans going to be able to continue to keep the market afloat before it all goes down the tubes?

As the media has been speculating, there are probably more banks out there like Northern Rock who will need bailing out.

This is going to become very serious.

Originally posted by Chorlton
As stated, the Bof E wouldnt have dished out money to it, if it didnt have the assets to back up the loans.

The reason for the Bank of England to step in was because others banks refused to loan to Northern Rock. It's quite alarming when banks are refusing to loan money to Britain's 5th largest mortgage lender.

This is the problem, banks will not lend to each other anymore.

They have a branch in Denmark too.

Just read they're under scrutenity by the Danish supervision board of finances now.

Same scene, people redrawing their deposits.

It's down by 29% now. This is like a self fulfilling prophecy, people predict problems, so people withdraw, causing more problems, causing more people to withdraw and so on. This may only be the start too, a lot of people may be at work right now, but tomorrow is saturday, there may be an even bigger run then.

Wow, this is the first time I've heard of a modern run on a bank.

Are your deposits insured by the government there in Britain? Like our FDIC?

reply to post by djohnsto77


On the BBC news, but not on the website, it said something like

first £2000 is guarenteed 100%
next £23,000 is guarenteed 90%

They may not be exact, but you get the idea. Another thing of note is that regular bank accounts is not the main business of this bank, mortgages are.

Originally posted by bobafett
It's down by 29% now. This is like a self fulfilling prophecy, people predict problems, so people withdraw, causing more problems, causing more people to withdraw and so on. This may only be the start too, a lot of people may be at work right now, but tomorrow is saturday, there may be an even bigger run then.

29%?!

Yeah, you are right about self fulfilling prophecy. Reports that consumers are concerned about other banks now and CEO of Northern Rock predicts others are in the same situation.

Originally posted by infinite
The last bank that had to be bailed out by the Bank of England was the 1970s.

According to The Economist, the Bank Of England's Emergency Funds are used roughly once a month, but the borrowers largeley remain un-named.

In fact, Barclays bank took out a similar loan of £1.6 billion earlier this month from the BoE.

Economist Article

Originally posted by Paul
Economist Article

Very good article'

the end is very interesting, makes a good points;

Yet until banks own up as to who has lost what—difficult, since many are struggling to value what they own—even the best-educated guesses are shots in the dark. “We're pushing around information, but nobody has any idea of what's going on,” says one large holder of bank stocks, head down in a stack of analysts' reports. “We can only hope that the Bank of England knows more, or that these banks are too big to be allowed to fail.” Which is precisely the sort of thinking that got banks into this mess in the first place.

A spokeswomen for Northern Bank has come out and said the business will stay open and deal with all the customers that are queuing outside the branches across the United Kingdom

Originally posted by bobafett
It's down by 29% now. This is like a self fulfilling prophecy, people predict problems, so people withdraw, causing more problems, causing more people to withdraw and so on.

Exactly If NR go under it'll be because of people over-reacting and thinking they're going to go under, thus causing them to go under ......

But that's humans for you, never the brightest sparks in the box!

Yes, Northern Rock might not be going bankrupt, but it's still serious.

The UK economy is built on the financial/housing sector and any problems in it isn't a good thing. Our housing market is slowing down, 20% of mortgages go through Northern Rock and the fear is spreading across the market.

Now banks are refusing to lend money to each other and the central bank is having to start bailing out now.

We will still manage to hit 3% growth this year, but 2008 is going to be ugly.

Hmmm... I wonder if this is the bank the Economist had in mind when they wrote this article last weekend?

A quiet crisis: The money markets smell a wounded bank

The gap between the rates banks pay to borrow money for three months, and that paid by governments, is at a 20-year high, suggesting that someone somewhere is believed to be in financial trouble.

the level of turmoil in the money markets suggests investors are seriously worried about a financial company going bust. Wouldn’t that have an enormous effect on economic confidence? And wouldn’t it be a major market event, given the importance of financial sector profits and the industry’s weight in global stockmarkets?

As for the mentality of the people lining up to get at their money... if you got wind that YOUR money was sitting in a troubled bank or fund YOU would also move it or try to get your hands on it.

Don't be a hypocrite try to tell me you would leave it there, laugh at all the "stupid people" in line and hope everything turns out fine for you.

Europeans are also savvy enough to know, understand and even remember financial hardships and events of the past, unlike their north american counterparts who live in a rosy world of make believe fantasy.

If I'm not mistaken I also read about a sort of a run on a financial institutions in California in recent weeks.

These are ominous signs of economic instability and perhaps a glance of things to come. Not to be taken lightly IMO.
.