Northern Rock's shareholders should get nothing, says valuer

Bank would have faced a £5.7bn black hole had it gone into administration

Thousands of shareholders whose investments in Northern Rock were wiped out when the bank was nationalised were told yesterday that they should receive no compensation because the bank would still have been left with a £5.7bn hole in its finances after all debts had been paid off.

The opinion was published by Andrew Caldwell, a partner with the accountant BDO Stoy Hayward, in his first public report on the collapse of the British lender. His provisional ruling is open to consultation and a final report is not due until the new year.

But Mr Caldwell said that, having worked out what he believed was the likely outcome of an administration based on the terms of reference given to him by the Government, "there would be no surplus available at the end of the assumed administration period for distribution to shareholders". He added: "In reaching this provisional view, I have made what I consider to be optimistic assumptions with regard to both the assets that would need to be realised to repay the Bank of England loan and to asset performance. Failure to achieve these optimistic assumptions would increase that deficit."

However, Northern Rock's shareholders, who have been fighting for as much as 400p a share in compensation, vowed to battle on. Their next step is an appeal to the Supreme Court, although the outcome could ultimately be determined by the European Court of Human Rights because lower British courts have already rejected their claims. Jon Wood, a fund manager with SRM Global who has been leading investors' fight, said he was "not surprised" by Mr Caldwell's preliminary findings and that the terms of reference given to him meant he could hardly have ruled in any other way. He added: "We will fight on. I think it is all but impossible for us to get any justice until we get to Europe."

Mr Wood and his allies among the Rock's legion of smaller shareholders – many of whose investments date from when it shed its status as a mutually-owned building society in 1996 – claim that placing the bank in administration would have realised much more money because the Rock's problems were caused mainly by the drying up of wholesale finance markets rather than problems with its loans.

Mr Caldwell's statement came as the Government said it would inject £1.4bn of capital into the "good bank" that will be created on 1 January from Northern Rock's savings accounts and a proportion of its less risky mortgages. To achieve its aim of turning a profit for taxpayers from a sell-off – which many believe will happen before the general election – the Government would have to get a higher price than this. A further £1.6bn will go into the "bad bank", which will be known as Northern Rock Asset Management. It will deal with most of the bank's mortgages.

However, customers will not learn which part of the business holds their loans until the new year. Northern Rock is one of three "new" banks which the Government hopes will, under new ownership, inject renewed competition into Britain's banking industry.

The other two will come from parts of Lloyds Banking Group and Royal Bank of Scotland, which, under an agreement with EU regulators, are being hived off as a consequence of the state aid both have received.