Banks' shares rise as crisis calms

LONDON, England -- Shares in troubled mortgage lender Northern Rock rose on the London Stock Exchange Tuesday, following the British government's vow to guarantee all its savings deposits.

Northern Rock shares were up eight percent (23.25p) to 306p at the end of the day, a slight fall after having gained more than 11 percent earlier in the day.

However, it was a small rebound compared to two previous trading days when shares fell more than 30 percent per session.

Mortgage lender Alliance & Leicester, which saw its shares drop 15 percent on Monday, ended the day up 193p to 793p, a rise of 32 percent.

Bradford & Bingley, another major mortgage lender, finished up six percent (16.75p) to 295.75p after suffering an 11 percent drop a day earlier.

The FTSE 100 itself was up 100.5 points at 6283.3.

While people were still seeking to retrieve their money, the length of queues was much shorter than on previous days, Britain's Press Association reported.

The Northern Rock branch in Kingston-upon-Thames, southwest London, which had experienced huge queues since the weekend, had more than 50 people waiting half an hour before it was due to open at 8am.

One man said he arrived before 5am after being unable to get his money out during previous efforts on Saturday and Monday.

But only four people were waiting outside a Northern Rock branch in Newcastle city center when it opened at 8am.

And only about 40 customers were queuing outside Liverpool city center's branch. There were no queues outside the branches in central Leeds and Bournemouth.

Northern Rock told PA that its call centres were receiving just 9% of the volume of calls compared to Monday, with 80% of those people wanting to reinvest their money.

Treasury Chief Alistair Darling announced late on Monday that the government would guarantee the savings of Northern Rock depositors. Hundreds had ignored earlier pleas for calm and joined long lines outside the branches in Britain and Ireland, seeking to withdraw their funds.

"I do recognize that people are concerned, that's why we have put the matter beyond all doubt," Darling told a Downing Street news conference after a meeting with U.S. Treasury Secretary Henry Paulson.

Deposits "are safe and are guaranteed, that's unequivocal," Darling added.

Hector Sants, chief executive of the Financial Services Authority, reinforced that message on Tuesday.

Northern Rock "is solvent, it is not in trouble," the regulator told AP.

"We haven't had a regulatory failure here yet," Sants said. "This bank is solvent and rightly open for business and deposits are safe. The system has worked."

Northern Rock was the first British bank in 15 years to be bailed out by the Bank of England, although it has yet to draw any of the funding it requested at an emergency rate last week. E-mail to a friend

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