Shares in smaller British banks suffered a sharp sell-off Monday as analysts slashed profit forecasts and investors worried that other institutions could suffer a fate similar to Northern Rock. Alliance & Leicester, the UK’s eighth-largest bank, was hardest hit, losing almost a third of market value, while Bradford & Bingley, the mortgage lender, also fell sharply. The sell-off came as Northern Rock shares slid further after its Friday rescue by the Bank of England. Despite reassurances that savers would be able to withdraw their deposits, Northern Rock shareholders sold stock amid realisation that any takeover would only happen at a very low price. Northern Rock shares lost another 35% after falling 31% last Friday. The BBC’s Robert Peston warns that hedge funds are looking to profit from the next banking victim – and smaller lenders will remain vulnerable to the kind of negative speculation that hit A&L “unless and until the Bank of England succeeds in restoring confidence to wholesale money markets”.

This entry was posted by Gwen Robinson on Tuesday, September 18th, 2007 at 5:53 and is filed under Capital markets, Hedge funds. Tagged with alliance & leicester, Bradford & Bingley, northern rock. Edit this entry.