Shares in troubled bank still falling

Northern Rock was valued at less than £1bn today after traders sold shares on fears that a takeover of the troubled bank may not materialise.

The stock continued its recent slide with a drop of 21% to 202.75p, giving it a stock market valuation of around £850m. It had been worth £2.7bn before news of its emergency funding request to the Bank of England sparked a dramatic slide in its share price on Friday.

Market rumours yesterday focused on the possibility of cut-price takeover approaches from Halifax Bank of Scotland worth 100p a share, equivalent to just £421m, with Lloyds TSB said to be considering an £842m offer.

However, traders started to question whether any bid will emerge.

Martin Slaney, of GFT Global Markets, said: “There is still no sign of any bid interest at all. None of the rumoured names have come along to show an interest and, to be honest, why would they?

“There’s very little upside for buyers in this share at the moment.”

Mr King said the Bank was not offering ``ex-post insurance'' to institutions which had made unwise investment decisions.

“It is limited in size, it is limited in amount to each individual bank and that provides a strict limit on the extent to which there is some ex-post insurance,” he said.

“So we have balanced the concerns about ’moral hazard’ against the concerns that arose at the beginning of this week about the strains of the banking system.”