Northern Rock v Alliance & Leicester

[Swiss Toni]

I am at a slight loss (mentally, if not financially... ).

Northern Rock shares fell due to a panic in the retail sector not really understanding what was going on in the commercial money markets.

NR are grossly exposed to commercial lines of credit and there was a suggestion that these might dry up due to their (apparent) exposure to poor US mortgage debt.

But I am lost as to why A&L shares fell so heavily - there was no indication that the (irrational?!) fears of pensioners waiting outside branches of NR was going to happen to A&L, but the share price fell (ahem, like a rock) and has not substantially recovered?
A&Ls dividends are healthy too.

Note - I am not an A&L shareholder, just this one has me slightly bemused - and I am doing my research at the weekend in advance of a planned buy on Monday!!

Any suggestions gratefully received - the 'net doesn't offer the insight I might hope (other than it is an irrational thing?!) and I note A&L Directors buying £££ of shares at the close of business on Friday (which tends to be a sign they think it is on the up?)

Cheers!

 

[Dieselman]

As an A&L holder this is of some concern, but like you I think the market just reacted to the Northern Rock issue and that now would be a good time to be buying A&L shares.
If you track their performance over the last five years it has been solid and the shares have been at a healthy price.

Please note, my opinion is just that and in no way qualified.

 

[glojo]

I'm just someone that STILL has savings with Northern Rock (hopefully no shares) and have been surprised at recent events. I'm tempted to contact our advisor and buy some shares in one of these companies so like your good self, I'm interested to hear opinions.

Regards
John

 

[Mr E]

A&L have about 25% of their mortgage book financed from the wholesale market - hence the market worries at the beginning of the week with the NR debacle.

 

[Swiss Toni]

A&L have about 25% of their mortgage book financed from the wholesale market - hence the market worries at the beginning of the week with the NR debacle.

My understanding is that isn't anything like NRs exposure, nor is it the highest amongst the UK banks (particularly those ex-Building Societies)?

The fall and current low price still appears to make the price good value?

 

[masqueraid]

A&L are currently sixth in the mortgage lender league, (behind NR @ 5th), probably 50% of its mortgages are "underwritten" bank lending in the same way NR has been working.

Can't help feeling there have been some self-fulfililng prophecies recently. It's been a little like watching supermarkets announce there may be no milk for a couple of days only to find that panic buying removes it from the shelves for about a week.

I do have sympathy for some of the older people standing outside NR who may remember independent banks folding before the Bank of England took responsibility for underwriting.

 

[glojo]

An hour ago I received an e-mail from Northern Rock. Here is an extract that is quite interesting:

If you have already closed your Account and, like many others, wish to reinvest your funds into your original Account, please fill in a Savings Reinvestment Form (a link was attached, which I have removed) with your original Account details and return this to us with a cheque for the amount you would like to reinvest. We will then reopen the Account for you. Your security details will remain the same as for your original Account.
Any charges you paid will be automatically refunded to that account. This includes interest penalty charges or CHAPS (telegraphic transfer) fees. Please note you must reinvest before 5 October 2007 to benefit from this. In addition, you will be paid interest as normal on your Account for the period that the money was withdrawn.

From what I understand those that withdrew there savings might have incurred penalties, or lost some interest?? So to me this is a nice gesture.

John

 

[recycled]

could be a fake nigerian from lagos trying to cash in on the situation.
banks should not request for personal info by by email

 

[masqueraid]

The offer is genuine enough : http://www.northernrock.co.uk/
You're correct about the penalties, one notable saver withdrew around £750K with a 120 day penalty.

I wouldn't go filling in your account access details online though. I believe the reinvesment form is for postal deposits.

 

[glojo]

I wouldn't go filling in your account access details online though. I believe the reinvesment form is for postal deposits.

Definitely genuine and I never withdrew any of our savings so I will not be using this option.

I have not clicked on the link so have no idea what the format is.

John

 

[grober]

An hour ago I received an e-mail from Northern Rock. Here is an extract that is quite interesting:

If you have already closed your Account and, like many others, wish to reinvest your funds into your original Account, please fill in a Savings Reinvestment Form (a link was attached, which I have removed) with your original Account details and return this to us with a cheque for the amount you would like to reinvest. We will then reopen the Account for you. Your security details will remain the same as for your original Account.
Any charges you paid will be automatically refunded to that account. This includes interest penalty charges or CHAPS (telegraphic transfer) fees. Please note you must reinvest before 5 October 2007 to benefit from this. In addition, you will be paid interest as normal on your Account for the period that the money was withdrawn.

From what I understand those that withdrew there savings might have incurred penalties, or lost some interest?? So to me this is a nice gesture.

John

This may not apply to ISAs due to their tax free status going on withdrawal of the cash ! Apparently its under review by the treasury but I wouldn't hold out much hope.

 

[glojo]

This may not apply to ISAs due to their tax free status going on withdrawal of the cash ! Apparently its under review by the treasury but I wouldn't hold out much hope.

Agreed

The letter is quite specific about

Savings Accounts

Quote:

The Chancellor has made it very clear that all existing savings accounts with Northern Rock are guaranteed safe and secure during the current instability in the financial markets.
Her Majesty's Treasury has guaranteed:

• [FONT=Verdana, Arial, Helvetica, sans-serif]All accounts existing at midnight on Wednesday, 19 September 2007.[/FONT]
• [FONT=Verdana, Arial, Helvetica, sans-serif]New deposits made into those existing accounts.[/FONT]
• [FONT=Verdana, Arial, Helvetica, sans-serif]Future interest payments and movement of funds between existing accounts.[/FONT]
• [FONT=Verdana, Arial, Helvetica, sans-serif]All accounts re-opened by customers who have requested closure between Thursday 13 September and Wednesday 19 September 2007.[/FONT]

 

[R2e]

Unfortunately the stock market, like the money market, is simply legalised gambling, and like most gamblers, rumour, superstition, and follow the herd mentality are the order of the day. Stock value does not necessarily reflect the value or prospects of the company concerned, just the opinions and chinese whispers of a number of overpaid sheep in the city and other financial centres. Sadly their games have an effect on the rest of us, our investments, our pensions, our mortgages. Think back to the late eighties when city whizz kids were buying Porsches on the back of profits made buying and selling currencies while their attacks on the pound had us losing or nearly losing our houses through outrageous mortgage interest rates as the government and Bank of England tried to stop financial meltdown.