Newspaper article The Evening Standard (London, England)

City Talk Puts HSBC on Northern Rock Bid Trail

Newspaper article The Evening Standard (London, England)

City Talk Puts HSBC on Northern Rock Bid Trail

Article excerpt


THE collapse of the subprime mortgage market in the US has left NorthernRock looking like a sitting duck.

A bid from HSBC may be just around the corner. That was the story doing therounds in the Square Mile today as shares of Northern Rock raced up theleaderboard with a jump of 44p to 772p.

They were changing hands at 638p just last week despite reassurances from themortgage lender that its exposure to the subprime crisis was minimal. Sometraders attributed today's rise to investors covering their positions havingsold the shares short at the height of the subprime crisis.

Now the speculators have convinced themselves that a bid from HSBC is imminent.Only yesterday, Cazenove admitted that HSBC, down 512p at 902p, could affordthe [pounds sterling]3.5 billion that would probably be needed to secure the backing of theNorthern Rock board, but was doubtful that any such move would be made shortterm.

Recent consolidation in the banking sector suggests further deals are on thecards. Overnight Banc of America agreed to pump $2 billion ([pounds sterling]1.01 billion) intotroubled Countrywide Financial, America's largest mortgage provider, which hasseen 30% of its value wiped out in recent days.

Shares generally opened on another positive note, with investors pinning theirhopes on another strong opening for the Dow this afternoon on Wall Street. TheFTSE 100 index rose 60.6 to 6256.6.

The wider FTSE 250 climbed 160.5 to 11,071.0. Hopes the current rally can beextended further brought in the buyers for other financials such as hedge-fundoperator Man Group, 1634p better at 49814p, and Schroders, up 31p to 1311p.

But mining shares set the early pace with Vedanta Resources up 37p at 1696p,Antofagasta ahead 1612p at 711p, and Kazakhmys putting on 34p to 1284p.

The UK's largest housebuilder, Persimmon, suffered a reaction in the wake ofTuesday's half-year profits. ABN Amro has repeated its buy rating but cut itstarget from 1720p to 1530p after scrutinising the group's land bank. …

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