Saturday, May 16, 2009
West Bromwich building society in trouble
The Times: Building society in rescue talks
A RESCUE operation to save one of Britain’s biggest building societies is under way in the first of a new series of expected bailouts in the sector.
Posted by devo @ 10:16 PM (2723 views) Add Comment
20 Comments
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1. devo said...
No need to start queuing now; wait 'til the morning.
2. devo said...
See also:
West Brom’s painful reminder of our woes
The Sunday Times
May 17, 2009
The big banks have been recapitalised, now it is the turn of the smaller lenders. If readers need reminding just how delicate this economic recovery is, West Brom provides it. This is a building society that has over-exposed itself to the commercial-property sector and is faced with rising repossessions from its retail customers.
It’s a glimpse into middle England – and all is not well. The capital markets are still illiquid and West Brom has little choice but to seek help from a white knight. Failing that, it will have to be taken under the control of the government, along with Northern Rock and Bradford & Bingley
http://business.timesonline.co.uk/tol/business/columnists/article6301710.ece
3. debtfree said...
"it made sizeable losses last year due to bad debts on commercial property."
Commercial Property is the next rung down the ladder, after that credit card debt.
"It has an alarmingly high BTL [buy-to-let] and commercial-loan portfolio, combining to represent nearly two-thirds of the whole loan book,”
2/3rds ! this building society is not going to make it. commercial property is in free-fall whilst BTL loans are down 70% with repossessions up 50% from last year, with a majority of them probably BTL.
seems this crisis has a long way to go yet.
4. little professor said...
Aww, poor West Brom. I'm sure they got into this mess through no fault of their own.
Oh wait...
West Bromwich targets sub-prime
West Bromwich Building Society will move into the sub-prime market on a trial basis from October.
Paul Marland, area general manager at West Bromwich, said: "We have been in niche markets for some time, including buy to let, commercial lending and 100% shared ownership schemes for about 18 months. There are a growing number of building societies such as Stroud & Swindon moving into non-prime areas as the margins are much higher but we will continue to deal with prime cases too, as this provides a good way of spreading the risk associated with this part of the market."
Defaults on unsecured loans are ignored but no County Court Judgements from the last six months are allowed.
Craig Arthur, branch manager at the Finance Centre, said: "It is a bold move for a building society to go into a high risk area such as sub-prime, particularly when the market is as saturated as it is."
Independent
Richard Dean, 52, is buying three buy-to-let properties in Tooting Bec, south London.
He has chosen to fund each of them on an interest-only basis using West Bromwich building society's Euribor tracker mortgage. The deal is 2.3 per cent above Libor for two years, giving a pay rate of 4.6 per cent today, before switching to 2.8 per cent above Libor for a further three years.
"The low initial rate attracted me to the deal - and [the expectation] that it should stay low for five years," says Richard, a writer. "The adviser assured me that, historically, this had been the case with Euribor.
Richard is not concerned about keeping up with the movements of a foreign interest rate. "I've never been a great student of these things," he says.
West Brom buy-to-let increase posted
West Bromwich Building Society has declared that it has seen buy-to-let mortgage business boom, despite an overall slow down in the UK housing market.
The building society said in a press statement that it is "on track to break all previous buy-to-let lending records", adding that it has witnessed a 46 per cent increase in business over the past year.
James Taylor, West Bromwich Building Society mortgage product manager, said: "While the national story suggests that the market has slowed to some degree, as far as the West Brom is concerned, the market is still very much alive.
"Following the recent improvements in our buy-to-let policy and criteria, our presence in this key market continues to grow and all the signs are that it will continue to do so," he concluded.
West Brom widens buy-to-let range
West Bromwich Building Society is looking to extend its appeal to sub-prime buy-to-let customers by offering the products across the whole of the market.
Previously only available through six broker firms, the range will launch towards the end of June, following a positive response to its pilot. The lender is to use a prime buy-to-let scorecard, ignoring single defaults and CCJs.
James Taylor, mortgage product manager at West Bromwich, said: "Nowadays, one default should not be something that is taken as seriously as ten years ago. A lot of clients are finding that they are being put into much more adverse categories than the odd indiscretion really merits, and we are doing something towards correcting that by creating products for them."
Brum Brum: a car with your mortgage West Bromwich Building Society will raise the stakes in the competitive UK mortgage market today when it becomes the first lender to offer its customers a free car with every home loan.
The new "Brum Brum" mortgage will come with a free Rover 25 for anyone who borrows between £90,000 and £500,000.
West Bromwich Building Society to Sell Mortgage-Backed Bonds
West Bromwich Mortgage Company Ltd., a unit of U.K. lender West Bromwich Building Society, plans to sell 575 million pounds ($1.15 billion) of bonds backed by home loans.
The bonds for the West Bromwich, England-based lender will package buy-to-let loans, according to Barclays Capital, which is managing the sale with Citigroup Inc.
Banks create mortgage-backed securities by pooling home loans and selling them to investors as notes. This allows them to raise capital more cheaply than they could through unsecured debt, or to broaden their sources of funding.
5. mr messy said...
i can remember 12 months ago going into the wbbs and seeing an article posted on the wall with one of their main financial directors saying what a great position they were in to weather the financial storm , obviously trying to stop people withdrawing money from accounts with more than £50,000 in them . Do these so called experts really know what they are doing ,and i am glad i closed mine and distributed it around as they are clearly not to be trusted , they are all a bunch of " merchant bankers "
6. devo said...
Great work, little professor@4. Looks like you've been expecting this news.
Which building society will be the next to collapse, do you think?
7. mrmickey said...
I closed my account with them some time ago as they were starting to look suspect, so this has come as no surprise.
8. p. doff said...
Stating the obvious, but as I said, the higher the rate, the higher the risk.
16. p. doff said...@14
Plenty of 4%+ savings around at the moment, from cash strapped building societies as tyrellcorp says. I've only seen these rates with fixed rate bonds - 12 months plus. I think West Bromwich do the 4.3%, but Coventry and Skipton B/socs are around 4%.
Remember the downgrading some B/socs have suffered - and it's usually the case that the higher the rate, the higher the risk. So it's wise to stay below the £50K FS/compensation scheme limits.
Tuesday, May 12, 2009 03:22PM
9. confused76 said...
great stuff, LP!!
10. quiet guy said...
Look's like somebody hasn't been doing their homework devo:
http://www.guardian.co.uk/money/2009/may/17/savings
Dated 17 May 2009, Lisa Bachelor writes:
'According to Andrew Hagger of Moneynet.co.uk the West Bromwich account "offers excellent value in the current climate." He says: "It may be a better approach to lock in for a shorter term as nobody is sure when and how quickly base rate and savings rates will recover."'
Or if your savings provider is about to go bust.
11. hpwatcher said...
yeah, great work 4. little professor....
BUT, could this not be a deliverate stategy? I mean to get access to government funds?
This crock should be left to go to the wall, just like the others should have, then maybe we will end up with a few correctly run banks.......
12. taffee said...
great post little prof....the delusion ran deep then.
13. icarus said...
Yes good stuff from LP @4. In the 'West Bromwich targets sub-prime' section the general manager is quoted as saying 'we have been in niche markets for some time'. And now he knows why they were niche.
WB Building Society looking for a white knight? How about Sir F*** Goodwin?
14. little professor said...
For me the worst quote of the lot was the
James Taylor, mortgage product manager at West Bromwich, said: "
It just sums up the "it's different this time" attitude of the era, where common sense was thrown out in the pursuit of more and more profit.
15. Little Professor said...
sorry, quote should be:
James Taylor, mortgage product manager at West Bromwich, said: "Nowadays, one default should not be something that is taken as seriously as ten years ago"
16. little professor said...
Sorry, quote should be
James Taylor, mortgage product manager at West Bromwich, said: "Nowadays, one default should not be something that is taken as seriously as ten years ago
17. jack c said...
Top notch posting LP - I'll now add my bit to the mix in so much as the following seems to have crept under most peoples radar and can IMO only add to the mounting pressure on many societies as they are soon to be subject to a huge multi-million pound outflow of funds
Local councils' building societies fears
Published: Thursday, 14 May 2009, 5:36PM
By Chris Choi, ITV News consumer editor
The special investigation I did shows 60 local councils have been given advice that means many are pulling millions of pounds from Britain's building societies, except for Nationwide.
Some local councils are so concerned about the financial health of some of the lenders that they've appealed to the government to guarantee their deposits until they can get them out.
The FSA is running checks on the societies, known as "stress tests", to ensure they will survive the recession.
Although we often think of building societies as being "solid", "traditional" operations, some do have large exposure to subprime and buy-to-let mortgages.
They all insist they are safe and secure and read on if you are an individual with money in building societies, there is no reason for you to worry!
I met up with Councillor Melvyn Caplan of Westminster Council. He told me “It means in effect that we’ll have to withdraw the money we currently have with them over the next four to five months. We’re talking about £50m that we have invested in various building societies.”
Building societies assured me that they are safe and secure, even so I was told some councils want special protection for the funds they have in societies.
Andy Golding, Chief Executive of Saffron Building Society, told me about the pressures facing building societies: "Firstly, we’re in an incredibly low interest rate climate, so that makes it difficult from a margin perspective between your savings rates and your borrowing rates, but also in terms of the investment portfolios that each building society has – of course we’re earning a lesser return on those as well.”
Adrian Coles from the Building Society Association said “Building societies have very significant reserves that they can fall back on. Their accumulated profits over the years haven’t been given to shareholders – they’ve been kept in the business for rainy days just like this.”
In his first TV interview Mark Pickering, director of Arlingclose, which advises up to 60 local councils where to invest money, described building societies as “a weak model that has been exposed by the bursting of the house price bubble, by the ongoing credit crunch and by the low absolute level of interest rates.”
Explaining why Arlingclose would advise clients to pull money out of building societies, Pickering continued: “We’ve seen a number of high profile cases over the last year where building societies have drifted into trouble. We want to avoid those bad news stories for local authority funds.”
For individuals, deposits in building societies are protected by the governments deposit guarantee scheme - up to £50,000. What worries some councils - is that their funds have no such protection.
18. braindeed said...
sorry, quote should be:
James Taylor, mortgage product manager at West Bromwich, said:
If the sky above you
Should turn dark and full of clouds
And that old north wind should begin to blow
Keep your head together and call my name out loud
And soon I will be knocking upon your door.
You just call out my name and you know where ever I am
Ill come running to see you again.
Winter, spring, summer or fall
All you got to do is call
And Ill be there, yeah, yeah, yeah.........feckng yeah
19. peeping tom said...
I used to have savings in the West Brom, but they kept sending me bumf asking me if I was interested in buy-to-let, so I cleared all my savings out. I still have its Buy to Let Guide leaflet which I kept for posterity. Incidentally Gillian Shepherd MP, who was Norman Lamont's number 2 at the Treasury during the Tory bubble is a director of this building society.
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