Sub-prime crisis impacts on Northern Rock's fund-raising

UK banks may be seeing the crisis in the US sub-prime market impact on their ability to raise funds in capital markets and grow themselves in line with forecasts, analysts have warned.

Lender Northern Rock, which raises around three-quarters of its money on wholesale markets, has lost 22 per cent of its value in the last five weeks as investors opt to delimit risk by halting investment into mortgages.

Although not directly implicated in sub-prime lending, Northern Rock is "trying to sell assets, or securitising, into the same market as sub-prime lenders", which constitutes a "real threat" to its liquidity, analyst Mike Trippitt at Oriel Securities told Reuters.

However, in statements the bank attempted to downplay its falling share price.

Other banks with a high loan-to-deposit ratio including Alliance & Leicester, HBOS and Bradford & Bingley are now also targets for concern.

"The issue is not direct exposure to subprime customers, it's the impact that has had on banks' ability to securitise," Mike Trippitt explained.

Conversely, HSBC, which was directly hit by the sub-prime crisis thanks to its US arm, has been only weakly affected by falling shares since the start of July.

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