Northern 'will still pay dividend'

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The lender is set to honour the 14.2p a share dividend announced on July 25 for all investors on the share register by the end of Friday.

The move is reportedly set to come under scrutiny by MPs on the Treasury Select Committee, who are said to be concerned that the dividend - up from 10.9p last year - was announced even after Northern Rock began to see funding come under pressure.

Northern Rock is understood to have taken legal advice over the dividend payment, which it is thought will cost the group £59 million.

While it has confirmed plans to pay the dividend, Northern Rock is not believed to be legally obliged to make the payout and is reported to have until Friday to change its mind.

Shares in the Newcastle-based lender were under pressure again on Monday, down 10% in the first hour of trading as reports suggested the group was struggling to find a buyer.

Any sale is now expected at a cut-price discount, with hedge funds touted as the most probable suitors given that many rivals are believed to be put off by its tarnished image and funding difficulties.

Northern Rock was forced to call on the Bank of England as lender of last resort earlier this month amid a meltdown in the wholesale money markets, on which it relies for most of its funding.

The news caused a run on the bank by savers worried that the bank would collapse.

Investors have also been baling out, with the group's shares having lost more than half their value since Northern Rock announced on September 14 it had asked the Bank of England for assistance with emergency funds.