Trinity Mirror shares collapsed by nearly a fifth yesterday amid fears that extra payments to its pension fund and a continuing slide in advertising revenues would put it in breach of its bank covenants.

The publisher of the Daily and Sunday Mirror, down 12½p to 54¾p, issued a warning two weeks ago about a sudden downturn in the advertising market in May, which worsened in June. Jonathan Barratt, of Kaupthing, said that another 5 per cent fall in his estimates for ad revenue in 2009 would imply they have breached covenants. The covenants on its loan require net debt to be no more than 3.25 times underlying earnings.

Trinity’s first-half results on July 31 are likely to be accompanied by a slew of asset write-offs and a warning that it will need to inject more cash into its underfunded pension scheme, further raising its debt. But a rights issue looks unlikely to succeed, given that UTV Media revealed yesterday that its issue was only 41 per cent subscribed. UTV fell 5½p to 123p. DMGT, home of the Daily Mail, which is due to issue a trading update next Wednesday, fell 13½p to 261½p in sympathy.

The FTSE 100 continued to test new depths. The index fell 128.5 points to 5,171.9, its lowest since July 2005, as fears over the imminent collapse of several US regional banks weighed on the banking sector. One trader said: “There are three stages to a bear market: a fall in stocks, downgrades by analysts and then blind panic. We seem to be entering the third stage.”

Royal Bank of Scotland, which owns Citizens retail bank in America, was a notable casualty, closing down 12.7p at 167.3p amid heavy volume – there was talk that an institution was looking to offload 160 million shares. Concerns that it will fail to get a decent price for its insurance division and fears about the exposure of its wholesale bank to US mortgage assets had investors stampeding for the exit. Its value has halved in three months.

HBOS fell 12p to 260p as Cazenove analysts said that underwriters of its 275p rights issue could be left with £800 million to £1.8 billion of stock on Friday when the offer closes.

Falling oil prices lifted Tui Travel 5.7p to 176.6p, with Thomas Cook advancing 3.7p to 179.5p and British Airways 3½p better at 210¾p.

Scottish & Southern Energy rose initially amid rumours of a £16.50-a-share bid from Vattenfall, of Sweden, but it ended down 7p at £13.94 after a director sold shares.

Carphone Warehouse fell 13.2p to 185.5p after BT unveiled plans to spend £1.5 billion on improving broadband connections. However, the revelation that it was suspending its share buyback programme to finance the move did not go down well with investors and BT fell 9.7p to 192.3p.

Galiform, the owner of the Howden joinery business, fell 4p to 30¼p amid talk that lease payments on the MFI shops it used to own could revert to it if the retailer goes into administration. New York: Wall Street shares continued to tumble as jittery traders worried about the strength of the banking sector. The Dow Jones industrial average closed 92.60 points lower at 10,962.50.

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