Northern Rock Customers Crowd Branches, Withdraw Cash (Update2)
By Sabine Pirone and Shelley Smith
Sept. 14 (Bloomberg) — Hundreds of Northern Rock Plc customers crowded into branches in London today to pull out their savings after the mortgage-loan provider sought emergency funding from the Bank of England.
“It’s scary,” said Peter Pye, 60, a retired university lecturer standing in a line of about 30 people outside the Moorgate branch in the financial district. “I have my life’s savings in Northern Rock.” He said he would withdraw a “six- figure” sum and leave 5,000 pounds in the account.
The Bank of England said it will provide emergency cash to Northern Rock, Britain’s third-largest mortgage provider, in the nation’s biggest bailout of a financial institution in 30 years. The rising cost of credit left the lender unable to make new loans and stoked concern among customers about their money.
Northern Rock, which has 1.4 million retail depositors and 800,000 mortgage customers, hasn’t imposed any special limits on withdrawals, spokesman Don Hunter said. The Newcastle, England-based company, which traces its roots back to 1850, had to restart its Internet banking site “over a period of time” today after unusually high usage froze the service, he said.
“It is understandable that customers are concerned,” Hunter said. “Their mortgages and savings are safe.”
Northern Rock has 76 bank branches, according to Hunter. By 11 a.m., dozens of people formed queues on the sidewalk outside the Moorgate office, the Maddox Street branch in the West End shopping district, and the Kingston Upon Thames outlet in southwest London.
`No Risk’
“There is no risk,” said James Hamilton, an analyst at Numis Securities in London. “The Bank of England said Northern Rock is solvent.” Hamilton said that “as credit turmoil will return to normal, Northern Rock’s business will as well.”
“Why leave your money in a bank that obviously has some major problems?” said Michael Ribotham, 74. “I’m not young and don’t have a chance to make it back again.” Ribotham had been waiting at Moorgate for about 40 minutes.
Northern Rock was formed from a merger between two building societies and the initial public offering of Northern Rock Building Society in October 1997. The stock plunged as much as 29 percent today. The lender said profit will trail analysts’ forecasts, blaming a “severe liquidity squeeze” and rising short-term interest rates.
“I am going to take out the lot, every penny,” said William Gough, 75, queuing with about 30 people outside the Maddox Street branch. Gough, from Belfast, in Northern Ireland, was “horrified” to hear about Northern Rock’s request for emergency funding.
`On The Safe Side’
Hunter, the bank’s spokesman, was unable to say how many customers were demanding to reduce or empty their accounts.
“I’m worried,” said Jenny Western, 33, a photographer from London. “I am taking all my money out. Maybe everyone is overreacting but I want to be on the safe side.”
The bailout will “help Northern Rock to fund its operations during the current period of turbulence in financial markets,” the Bank of England, U.K. Treasury and Financial Services Authority said in a joint statement.
“I don’t think anything is going to happen because the Bank of England won’t allow it to happen,” said Paul Delamere, 46, waiting at Maddox Street to withdraw his money. Still, he was “more comfortable” with reducing his account.
To contact the reporters on this story: Sabine Pirone in London at spirone@bloomberg.net . Shelley Smith in London at ssmith118@bloomberg.net
Last Updated: September 14, 2007 09:49 EDT
