Bank of England tries to stop a run on mortgage bank

LONDON -- NORTHERNROCK-FUNDING/ (UPDATE 5):UPDATE 5-U.K. props up wounded mortgage lender Northern Rock

The Bank of England provided emergency funding to mortgage lender Northern Rock on Friday after the bank, citing the global credit squeeze triggered by the U.S. subprime mortgage crisis, said it was unable to line up short-term loans from other financial institutions.

Even after the central bank issued a statement saying Northern Rock was solvent, slow-moving lines of customers snaked through the doors at the bank's branches to make withdrawals.

"I would not put a penny into that company again," said Tony Looch, 68, who withdrew his savings after standing in line nearly two hours outside a branch in central London. "There are a lot of older people who must be really scared."

The Bank of England's intervention is the first of its kind since it assumed the role of "lender of last resort" when it was made independent from the British government in 1997.

Shares in the bank plunged 30% as revelations of a cash shortage spooked investors, taking other stocks down with it, although not as far.

England's FTSE 100-share index closed down 74.60 points, or 1.17% Friday, at 6289.30.

Northern Rock CEO Adam Applegarth announced that profits would fall to between 500 million and 540 million pounds ($1 billion and $1.1 billion) — as much as 147 million pounds ($298 million) less than expected.

The bank has been unable to raise funds since last month, when the wholesale money markets it relied on for cash choked up. Applegarth said the problem is likely to continue the rest of the year, as bad U.S. loans continue rattle the market.

Though the bank requested substantial funds at a penalty interest rate from the central bank, Northern Rock had billions of pounds in cash at its disposal, Applegarth said.

"We can't tell when the global (credit) freeze is going to unwind. On that basis, it made sense to get this (credit) facility now," he told Sky News. He did not disclose how much the bank had borrowed.