Investors slashed another £95.6m from the stock market worth of Northern Rock yesterday as hopes of a takeover faded - yet the crisis-hit mortgage lender remained determined to pay stakeholders a dividend.

The bank has said it plans to press ahead with a dividend distribution worth around £59m, although it is also understood to have taken legal advice about whether it needs to pay the dividend and has acknowledged it is not legally obliged to do so.

A spokesman for Northern Rock yesterday said: "We confirmed on September 14 that the intention was to pay the dividend.

"We are well aware of our obligations and if there is anything new to announce on that then we would make that announcement."

Shares in Northern Rock swung wildly yesterday, falling as much as 16% to an all-time low of 163p before rising by as much as 16%, and then settling back to close down 11.5%, or 22.25p, at 172p.

The half-year dividend, scheduled to be paid on October 26, is worth 14.2p a share - some 8.25% of yesterday's closing price.

Northern Rock's dividend pay-out is sensitive because the bank is estimated to have borrowed £3bn through the Bank of England's "lender of last resort" facility, effectively underwritten by the taxpayer.

At the same time, investors have seen the value of their shares tumble more than 70% since the Bank of England help was announced, which prompted the first run on the deposits of a major UK bank for more than 140 years.

The lending bank's shares have plummeted from a year-high of 1258p in the days that followed the revelation that Northern Rock had been forced by the credit market crisis to line-up emergency funding from the Bank of England.

At the close yesterday, the company was worth just £722.8m, compared with £2.7bn the day before the crisis emerged.

Analysts yesterday said the bank's shares are likely to remain volatile until greater clarity emerges on the bank's future.

It is also estimated that billions of pounds have been withdrawn by panicked Northern Rock savers since the news broke just less than two weeks ago.

Northern Rock's woes were sparked by soaring interest rates in wholesale money markets, where the company borrows most of its cash for mortgage lending.

The global wholesale money market has dried up over the past month as a result of the crisis in US sub-prime mortgages, which has made banks and other investors less willing to lend to each other.

Meanwhile, a suitor for Northern Rock has so far failed to materialise, which also helped to drag down the bank's shares further yesterday.

"I think people were probably anticipating that over the weekend you would see somebody come in and say we'll have it at this level'," one trader said yesterday.

"Obviously this hasn't happened. You've seen some very tentative commentary with people saying they might like its book value or might buy some of its loan book positions, which is a lot more negative.

"By buying loan book positions they are buying at a discount, rather than looking to buy any of the bank's franchises, which is where they get their additional premiums."

It has now emerged that at least 12 UK and continental banks had rejected potential takeover moves on the crisis-hit mortgage lender.

Banking heavyweights including HSBC, Lloyds TSB, Royal Bank of Scotland, Santander and Credit Agricole are all understood to have walked away from the rescue effort at the Newcastle-based group.

Barclays, which is embroiled in a battle with a consortium that includes Royal Bank to acquire ABN Amro, has been in the frame as another potential bidder for Northern Rock.

Despite almost two weeks of efforts by the Bank of England and the Financial Services Authority to secure a rescue, the banks are understood to be wary of taking Northern Rock's £100bn in mortgages on to their books.

Meanwhile, a consortium of hedge funds is understood to be considering an offer for the bank's mortgage book at less than face value, which would leave shareholders with almost nothing.

The hedge funds include Cerberus Capital Management, which owns Chrysler among other assets, as well as Citadel.

Investment bank JP Morgan said in a research note that a sale of Northern Rock at a heavily discounted price was the most likely outcome.