Shares in beleaguered British bank Northern Rock Plc fell another 26 per cent yesterday, the 10th anniversary of the former building society's stock market listing, amid fresh concerns of a sharply discounted sale.

Speculation that hedge funds or private equity investors are the most likely buyers of the bank is gathering momentum, raising concerns over a fire sale of its assets that would leave shareholders with virtually nothing, analysts and dealers said.

"The main banks don't seem to be interested [in buying Northern Rock]. It feels more and more likely that someone like Chris Flowers could get the business, with the backing of a big liquid bank," one analyst said.

"And the longer it is left the more the franchise gets eroded." Chris Flowers runs JC Flowers, which together with Cerberus, another hedge fund, has been rumoured to be interested in buying Northern Rock.

It was reported at the weekend that the UK treasury had given two US hedge funds permission to start takeover talks with the stricken lender.

Reports also revived talk Lloyds TSB could take on Northern Rock, but again at a sharp discount. Northern Rock, which has been engulfed in crisis since being offered emergency financing from the Bank of England last month, said last week it had received approaches including a possible takeover offer.

Northern Rock shares touched a low of 121.5p before ending 47.1p down on the day to close at 132.1p to value the bank at £557 million.

Stockbroker Panmure Gordon yesterday cut its price target on the shares to 100p from 300p and said lower bids for it "could be easily justified". Analysts have also cut earnings forecasts for this year and next.

The Bank of England has offered emergency lending to Northern Rock at a penalty rate, and accounts from the central bank last week suggested Northern Rock may have borrowed up to £7.75 billion. - ( Reuters)