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Last Updated: Tuesday, 25 September 2007, 18:30 GMT 19:30 UK
Northern Rock dividend cancelled
Northern Rock branch

Northern Rock has confirmed that it is cancelling the dividend that it was due to pay to shareholders next month.

First news that the payments would be withheld came from the BBC's Business Editor Robert Peston.

He said that the bank had come under intense pressure from the Financial Services Authority (FSA) and the Treasury not to make the 59m payment.

Northern Rock also said it was in talks with people who wanted to buy some or all of its business.

"The company has received a number of approaches regarding a variety of potential transactions," it said in a statement to the London Stock Exchange.

The bank said it is in preliminary discussions with selected parties but warned they may not lead to a deal.

'Not appropriate'

Northern Rock was due to make its dividend payment on 26 October, but the bank said it would not be appropriate to pay shareholders until it was sure about its eventual ownership and structure.

The 14.2 pence per share payment was announced before its problems emerged.

Two weeks ago it applied to the Bank of England for emergency funding.

"The Treasury was deeply unhappy about Northern Rock paying a dividend at a time when the government has been forced to underwrite all deposits and loans to Northern Rock," Mr Peston said.

Action group

Following a run on the bank, the government pledged to guarantee all Northern Rock deposits held in accounts as of midnight, 19 September.

The cancellation of the dividend is another blow for shareholders, who have now joined forces in an action group to promote their interests.

The group has been set up by the UK Shareholders Association (UKSA), which says "many shareholders were persuaded to invest in shares in the company in recent months based on the apparent strength of the business when in reality the company was in great financial difficulty".

The group is opposed to a quick disposal of Northern Rock that might not reflect the true value of its assets.

Shares in the bank - which have lost nearly 75% of their value since it was forced to seek emergency funding - slipped a further 5.2% on Tuesday.



VIDEO AND AUDIO NEWS
Reaction to Northern Rock's decision



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