The future of Northern Rock looked uncertain today amid rumours of a likely sell-off prompted by the current crisis.
For a second consecutive day, savers queued at branches throughout the UK yesterday to drain their accounts, despite assurances from the regulator that their money was safe.
Customers queue outside a branch of Northern Rock yesterday
Anxious bosses at Northern Rock must now wait to see if the run on the bank continues tomorrow, when doors will open an hour early to accommodate the expected numbers. They will also find out if shares in the bank, the UK's fifth largest mortgage lender, plummet further, making the company even more vulnerable to a takeover attempt.
In a report today, the Sunday Telegraphsuggests that the bank is already preparing for a sell-off. The newspaper says that one plan being discussed by City bankers is to break up the company's Stg£100 billion mortgage book and distribute it among other lenders.
It also quotes Adam Applegarth, Northern Rock's chief executive, as saying: "Our share price has come off 30 per cent. You have got to be more vulnerable (to a sale) if your share price has come down. It's up to bidders to make a bid."
Experts have predicted that the name of Northern Rock could disappear from the High Street within a year, such is the impact of its current woes.
Brand damage and a slump in share price has made a takeover of the bank a real possibility in the coming months, it has been claimed.
Justin Urquhart Stewart, of Seven Investment Management, said: "I expect that in a year's time, Northern Rock will not exist. As a brand it is shot.
"The question will be who will own it."
HSBC and Lloyds TSB are seen as potential suitors. Both are rumoured to have shown interest in Northern Rock in recent months. Of the two, HSBC is believed to be the more likely candidate. At present it only has a small presence in the UK mortgage market.
Lloyds TSB, on the other hand, has a stronger market share through its mortgage arm, Cheltenham & Gloucester.
The name of HBOS, the UK's largest lender, has also been mentioned. But it is thought unlikely as it could be problematic due to competition rules.
Market reaction to savers' decision to make a run on deposits could hasten a move on Northern Rock. It is believed that customers have already withdrawn more than Stg£1 billion in savings since news broke on Thursday that the bank had sought emergency funding from the Bank of England.
That decision was prompted by ongoing cashflow problems caused by the drying up of the money markets, which has deprived Northern Rock of one of its main source of funding.
Britain's chief financial watchdog last night tried yet again to allay the fears of customers. In a statement, the Financial Services Authority (FSA) said it judged Northern Rock to be solvent and that savers could continue to deposit and withdraw funds.
Problems experienced by customers online or at branches were "entirely logistical", it said, adding that it was "in no way related to the bank's solvency".
PA