You are here: Home - Saving & Banking - News -

Wreck of the Rock stock shock for disgruntled shareholders

0
Written by:
26/09/2007

Northern Rock has scrapped plans to pay out its £59m interim dividend, following increasing pressure from both the Treasury and the FSA, says Kate O’Raghallaigh

The bank has been under intense scrutiny from MPs and regulators in recent days regarding its intention to reward shareholders, while it is currently staying afloat on taxpayer’s money.

The troubled bank’s announcement comes just two days after it defended the decision to pay its shareholders next month, even though it was not legally obliged to do so.

In a statement issued to the London Stock Exchange (LSE) last night, the bank said: “It would not be appropriate to make any interim dividend payment until it can make a full announcement regarding the outcome of discussions with other parties and the development of the business model”.

The decision has drawn mixed responses, with major shareholders expressing anger at the last minute withdrawal of the promised dividend.

Northern Rock is now in talks with investors, with a takeover bid among the possibilities being explored.

According to the statement issued to the LSE, the bank has received “a number of approaches regarding a variety of potential transactions, including the possibility of an offer being made to the company”.

Analysts have said that while chances of a takeover bid are middling, it is more likely that the bank will be put into administration, resulting in the company’s assets being sold off, and jobs being terminated.

COMMENT by Kate O’Raghallaigh

The most interesting thing about the latest decision made by the wreck that is Northern Rock, to me at least, is the reaction it has provoked amongst shareholders. Little relief has been publicly expressed by anyone, least of all by British taxpayers, who will now not have to fund a financial reward which isn’t even legally required to be paid.

Talks of shareholders filing a class action lawsuit against the bank are nothing short of hilarious – a reader’s comment in today’s Daily Telegraph sums it up perfectly: “How typical of the times we live in when shareholders who suddenly find things aren’t going their way decide to resort to legal means to claw back their investment”.

He’s not wrong there; such reactions do nothing to dispel the view that we live in an unremitting ‘complaint culture’, in which the only way to rectify something, is to wait until it goes wrong, then moan about it.

While the bank’s intention to go ahead with the payout was, in part, understandable – it is important for Northern Rock to convince the public of their reliability, even in times of crisis, it would have been unfair for the taxpayer to overcompensate for such ‘generosity’ – generosity which was, in effect, nothing more than a desperate attempt at holding onto their shareholders.

Tagged:

Tag Box

Debt

Pension

Spending

Financial fitness

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Which ISA is right for you? A round up of the six products available in 2017

From cash to innovative finance to lifetime, here's our guide to the ISA products available to savers this yea...

Guide to buy-to-let tax changes

In late 2015, former Chancellor George Osborne announced a range of  tax measures aimed at landlords, which t...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Five fund tips for a 0.25% interest rate environment

With interest rates stuck at a record low 0.25% and expectations rates could fall to close to zero, here are ...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Investing your money

Alliance Trust Plc gives you smart insight into how to invest your money

Money Tips of the Week

Read previous post:
ED’S NIBS

REASONS TO BE CHEERFUL SAYS GARTMOREGartmore fund managers Roger Guy and Guillaume Rambourg discern plenty of “reasons to be cheerful”...

Close