Northern Rock It Will Be A Close Run Thing

[FTBagain]

Robert Preston on the BBC website does some pretty good analysis.

http://www.bbc.co.uk/blogs/thereporters/robertpeston/

In summary the Rock will have to put up just about everything they have a collateral to cover a worste case scenario. If the panic continues, and based on some of the stories and points made elsewhere on HPC I think it could do so for sometime yet, then the Rock could well be cleaned out.

[margesimpson]

Barely enough assets cover total deposits?

Deposits = 24 billion.

Assets = 113 billion.

[Spikey1]

Barely enough assets cover total deposits?

Deposits = 24 billion.

Assets = 113 billion.

Unless they are going to start giving branches away to those wishing to withdrawl I think it means liquid assets!

[gfromls]

is a mortgage or a loan classed as an asset?

[Roman Abramovitch]

Oh sod it I think I'll try for an unsecured loan or a non-conforming mortgage

This from their website for intermediaries

New Specialist Lending Product Range Now Available

We are pleased to announce the launch of Northern Rock Specialist Lending, offering a full range of non-conforming mortgages to you and your clients.

For full details of the new range including rates, product information and lending policy please follow the links on the menu on the left-hand side.

Lifetime Mortgages

Please note that an additional lifetime mortgage declaration must now be completed for all lifetime cases. This additional declaration can be found in useful downloads.

We are a member of the Mortgage Trading Exchange

USL intermediaries

unsecured loans

Why not offer unsecured loans to your clients as an additional benefit to your service. To see our rates or get a quote just take a look at our online calculator. Our rates are currently at 7.4% APR typical and loans are available from £1,000 to £25,000.

Please ensure that you have registered before submitting any applications. Your personal USL identification number will be requested on submission of your application.

further enhancements

log in to your online accounts

find out more

click here for more details

© Northern Rock plc. 2007

[Guest DissipatedYouthIsValuable]

is a mortgage or a loan classed as an asset?

Quite.

Assets might look a bit smaller soon.

[crash2006]

they are digging a bigger hole with non-conforming mortgages it just shows you the x mpc guy was correct.

[margesimpson]

Unless they are going to start giving branches away to those wishing to withdrawl I think it means liquid assets!

Their liquidity has been guaranteed by the Bank of England.

The panic might be fun viewing, but the reality is NR has easily enough assets to cover deposits as we all know.

[?...!]

Their liquidity has been guaranteed by the Bank of England.

The panic might be fun viewing, but the reality is NR has easily enough assets to cover deposits as we all know.

It was a mistake by Alistair Darling, you have to let bad businesses go to the wall.

So Northern Rock cannot get funds from global markets, they cannot get funds from depositors. They can write mortgages to people but nobody will buy the securities.

HOW CAN THEY MAKE ANY MONEY? By giving away governments money? Where is the profit? They are bankrupt, get used to it.

Are the BoE going to prop them up, holding all those mortgage backed securities and just hope that the credit spreads will return to 100bps?

Just hope that buyers will return to the sterling denoted securities market, at a time when the BoE are being so lax!

It's impossible.

The Chancellor has no idea, not the faintest clue what he is doing. It's an embarrassment.

I deplore this government and all their amateur goons.

.

Edited September 15, 2007 by ?...!

[@contradevian]

It was a mistake by Alistair Darling, you have to let bad businesses go to the wall.

So Northern Rock cannot get funds from global markets, they cannot get funds from depositors. They can write mortgages to people but nobody will buy the securities.

HOW CAN THEY MAKE ANY MONEY? By giving away governments money? Where is the profit? They are bankrupt, get used to it.

Are the BoE going to prop them up, holding all those mortgage backed securities and just hope that the credit spreads will return to 100bps?

Just hope that buyers will return to the sterling denoted securities market, at a time when the BoE are being so lax!

It's impossible.

The Chancellor has no idea, not the faintest clue what he is doing. It's an embarrassment.

I deplore this government and all their amateur goons.

.

Perhaps they are unaware of the BTL boom which NR helped create. They had nearly a 20% share of the UK mortgage market. I didn't know they were that big. Politically bad news if the only way BTL speculators can get their funding is via a state sponsored bank

[topliner]

Perhaps they are unaware of the BTL boom which NR helped create. They had nearly a 20% share of the UK mortgage market. I didn't know they were that big. Politically bad news if the only way BTL speculators can get their funding is via a state sponsored bank

Not true, Northern Rock entered the BTL market fairly late on in fact!

What they did do was fuel the FTB market with their 125% products, borrowers were paying over the asking price (even although they had a deposit) in the knowledge that they could outbid others as they had more borrowing power!

[Bloo Loo]

NO Darling has done the right thing- he's saved 1.5Million Uk citizens the trouble of claiming compensation from the Financial compensation scheme- which itself has probably had its money removed in a recent stealth tax

[uro_who]

Surely the exact problem is that the mortage assets are very difficult to value. The only way to realise them as cash is to sell them and hold on, no one wants to buy mortgages (except at 7 pence in the pound etc.) So it's really only the liquid assets that count surely. If they needed to start to sell their mortgage book at the current prices they'd get for it they'd soon be penny share!

[madasafrog]

Perhaps they are unaware of the BTL boom which NR helped create. They had nearly a 20% share of the UK mortgage market. I didn't know they were that big. Politically bad news if the only way BTL speculators can get their funding is via a state sponsored bank

NR are the kings of the 100% + mortgage. If you heard of someone saying that they were getting a 100%mortgage, you would instantly think of NR.

It has helped a lot first time buyers get on the housing ladder. NR has made good profit from this by charging over the odds interest on the mortgage and on the unsecured loan that goes with it.

With NR going, (bit presumptuous I know but lets face facts, its toast), it will affect first time buyers more than BTL.

[jackalope]

It was a mistake by Alistair Darling, you have to let bad businesses go to the wall.

If the NR customers were all Conservative voters then Brown and Darling would have had no compunction about letting it go down the sh!tter. But the demographics of NR customers are that lots of them are old (old people vote) and lots of them are in the North of England (people in the North vote Labour).

With on eye on a GE they can't afford to let the lifesavings of pensioners in the Labour heartland disappear into the maw of global capitalism.

[Solvent Celt]

Barely enough assets cover total deposits?

Deposits = 24 billion.

Assets = 113 billion.

Irrelevant.

Can it liquidate it's assets rapidly enough to meet depositors demands, pay creditors and meet it's running costs?

[Japhy Rider]

Perhaps they are unaware of the BTL boom which NR helped create. They had nearly a 20% share of the UK mortgage market. I didn't know they were that big. Politically bad news if the only way BTL speculators can get their funding is via a state sponsored bank

I think that is 20% of th NEW loan market. Which makes them more of a fly-by-night than a big player. I'd like to know how big they really are but I'm having trouble cutting thriough all the guff that's out there at the moment.

Anyone know?

JR

[AvidFan]

Irrelevant.

Can it liquidate it's assets rapidly enough to meet depositors demands, pay creditors and meet it's running costs?

Slight change of subject. Where are you getting the breakfast cereal humour from? Is there a website or are you designing them yourself? I'm finding them quite amusing, so if there's any chance you can include them full size (I haven't seen your avatar before for example) I'd be very grateful.

[Solvent Celt]

Slight change of subject. Where are you getting the breakfast cereal humour from? Is there a website or are you designing them yourself? I'm finding them quite amusing, so if there's any chance you can include them full size (I haven't seen your avatar before for example) I'd be very grateful.

I do them myself. People seem to like the breakfast cereals. I'll start a thread in the off topic section and put them all in there.

[AvidFan]

I do them myself. People seem to like the breakfast cereals. I'll start a thread in the off topic section and put them all in there.

Now that's talent. I'll keep an eye out for the thread. Thanks.

[frozen_out]

NO Darling has done the right thing- he's saved 1.5Million Uk citizens the trouble of claiming compensation from the Financial compensation scheme- which itself has probably had its money removed in a recent stealth tax

This is a really interesting point IMO. Was the panic actually engineered to allow depositors a reasonable amount of time to withdraw their savings without going through the rigmarole of claiming back from the administrators etc.?

Probably not (I doubt the current government could be that clever), but it would make sense.

[oktup]

It was a mistake by Alistair Darling, you have to let bad businesses go to the wall.

So Northern Rock cannot get funds from global markets, they cannot get funds from depositors. They can write mortgages to people but nobody will buy the securities.

HOW CAN THEY MAKE ANY MONEY? By giving away governments money? Where is the profit? They are bankrupt, get used to it.

Are the BoE going to prop them up, holding all those mortgage backed securities and just hope that the credit spreads will return to 100bps?

Just hope that buyers will return to the sterling denoted securities market, at a time when the BoE are being so lax!

It's impossible.

The Chancellor has no idea, not the faintest clue what he is doing. It's an embarrassment.

I deplore this government and all their amateur goons.

.

Hi ?...!

Can we blame you for giving him bad ideas?

Just wondered if your thoughts on the inflation/deflation picture had changed at all, or not, as a result of this.

thanks

[?...!]

Hi ?...!

Can we blame you for giving him bad ideas?

Just wondered if your thoughts on the inflation/deflation picture had changed at all, or not, as a result of this.

thanks

Still deflation. I see a huge equity contraction. Falling spending power, falling trade volumes and falling prices.

The West is about to suffer a falling capacity for work. In the face of a rising requirement for work in order to service record debt.

We will see a rise of manual labour, wage supression, longer hours, people wanting multiple jobs.

Employees are going to lose a lot of rights. People are going to be punished for their past spending habits.

Edited September 18, 2007 by ?...!

[JustYield]

It was a mistake by Alistair Darling, you have to let bad businesses go to the wall.

So Northern Rock cannot get funds from global markets, they cannot get funds from depositors. They can write mortgages to people but nobody will buy the securities.

HOW CAN THEY MAKE ANY MONEY? By giving away governments money? Where is the profit? They are bankrupt, get used to it.

Are the BoE going to prop them up, holding all those mortgage backed securities and just hope that the credit spreads will return to 100bps?

Just hope that buyers will return to the sterling denoted securities market, at a time when the BoE are being so lax!

It's impossible.

The Chancellor has no idea, not the faintest clue what he is doing. It's an embarrassment.

I deplore this government and all their amateur goons.

.

I don't think he's been quite as stupid as people here make out. They (the tripartite) don't care if NR shareholders get wiped out, or if the bank is taken over for £1, just so long as the depositors are looked after.

If, as you say the money market spreads won't return to viable levels, the business is dead anyway and should be wound up or taken over (at or near book). Without the politically motivated intervention, panic would have spread to other banks, as NR missed its next payroll, let alone rollover of its short term debt.

[?...!]

I don't think he's been quite as stupid as people here make out. They (the tripartite) don't care if NR shareholders get wiped out, or if the bank is taken over for £1, just so long as the depositors are looked after.

If, as you say the money market spreads won't return to viable levels, the business is dead anyway and should be wound up or taken over (at or near book). Without the politically motivated intervention, panic would have spread to other banks, as NR missed its next payroll, let alone rollover of its short term debt.

True, but it's akin to paying ransom money.

Northen Rock should be responsible for Northern Rock depositors as well as Northern Rock shareholders.

This sends the message to other banks; you look after your shareholders we will look after your depositors. Infact risk depositors money as much as you like, deposits are a free bond.

If you force depositors to look for safe banks it forces banks to be safe.

Darling has blown a new breath of risk into banking.

He has averted a minor crisis by offering to underwrite a deflating economy! Why should people suffer when we can all burn in hell together.