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Northern Rock shares leapt to their highest level in weeks this morning, amid reports that a hedge fund has built up a stake in the bank.

Monaco-based hedge fund SRM Global now owns a four per cent stake in the Newcastle-based lender, the Financial Times (FT) said today.

News of the investment saw the value of Northern Rock shares climb by 43 per cent to 295p by noon.

The FT said SRM's stake in the bank was significant because the hedge fund would have the potential to join with other investors in order to block a takeover of the bank.

In an interview SRM's chief operating officer, Philip Price, said the company saw value in Northern Rock.

"There is value there. The company should be allowed to survive," he said, in comments reported by Bloomberg.

Analysts had previously suggested that Northern Rock had no future in its existing form, amid fears that the company's brand name has been damaged by last month's high-profile run on the bank.

Indeed Northern Rock recently announced that it was in "preliminary discussions with selected parties" over its future.

However reports at the weekend suggested that the US investment banks Citigroup and Merrill Lynch were trying to put together a package of £10 billion of loans for Northern Rock, in order to fend off any takeover approaches.

Meanwhile Northern Rock shares gained almost 20 per cent yesterday after the government announced that it would guarantee all savings held at the bank.

Originally ministers pledged only to protect existing accounts held with Northern Rock, but the Treasury confirmed that it would now guarantee new deposits made after September 19th.

The government said the revised conditions had been put in place at the request of Northern Rock and would allow the bank to "pursue the full range of its strategic options".