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The Masked Tulip

B&b Leads Footsie Lower

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Banking stocks were under pressure yesterday as three-month sterling interbank lending rates hit eight-week highs.

Bradford & Bingley , the specialist mortgage lender, led the sector lower on fears that it might need a rights issue if it was forced to write down the value of its £1.1bn investment portfolio or its £1.3bn holding of bank bonds. Traders noted that B&B was in a precarious position with tangible equity of just £1.1bn.

B&B shares, which rose sharply on Friday due to takeover speculation, closed 9.1 per cent lower at 204½p.

http://www.ft.com/cms/s/0/bdf91e68-e98b-11...00779fd2ac.html

What does 'tangible equity' mean? Do they only have about 1 billion in cash?

Edited by The Masked Tulip

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Forget sub-prime mortgages: the fear has now moved the next step up, to those financial stocks such as HBOS exposed to “near-prime” mortgages.

HBOS led the FTSE 100 down, losing 45½p to 558p, taking its total loss to 147p since revealing last week that it had £7 billion exposure to such mortgages, also known as “Alt A”.

These home loans are taken out by people with no credit history or who certify their own income. Bear Stearns pointed out that the bank has said that it has total exposure to £42 billion of asset-backed securities, largely emanating from the American market.

UBS said that it was concerned about the “quality of treasury assets” at the bank. Its loans to individuals outweigh its deposits by 160 per cent, leaving it heavily reliant on funding from the expensive wholesale markets. UBS said that, if the wholesale market did not improve by the autumn, HBOS would have to cut customer growth targets.

http://business.timesonline.co.uk/tol/busi...icle3479539.ece

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Noticing a lot more for sale signs on leith walk and around leith in edinburgh this morning. Suitable doom laden newspaper headlines about "banking crisis" providing the backdrop. What effect could either of these two banks hitting serious trouble have on sentiment? Do you think it would tip a lot of people into a decision to just sell and get out of the market, cutting their price accordingly? There is quite a bit of work going on in my block just now, carpets, joinery etc. My landlord casually said the other day "when you go, I will put in a new bathroom and new kitchen and sell it" He didn`t put any pressure on about leaving. Do a lot of people still think they can spruce up the inside of a flat and have a stream of interested buyers any time they like? BTW I`m packed and ready to go with a large cash cushion because I just know that when it becomes obvious to all that there is a serious deterioration in the prices property can fetch, my landlord is going to panic and try and push the sell button.

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Why?

If Darling hadn't stepped in with the NR guarantee last September , the next bank runs would of been at A&L and B&B.

Stay well clear from these steaming turds :ph34r:

Edited by grey shark

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I have big doubts about the viability of Bradford & Bingley simply because of all the BTL mortgages they have, feel similarly about A&L.

I think this credit crunch will drag on until the end of the year at least by which their funding for 2008 will be drying up and most likely they will be seeking additional funding.

Both are offering very good IRs at the moment on instant access and on fixed term bonds but, you know, my gut tells me my money is saver in Nationwide and HSBC even though both are offering at least 1 percent plus less IR on savings.

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What does 'tangible equity' mean? Do they only have about 1 billion in cash?

In plain english, Tangible equity is profits retained from previous years trading. It's not cash, in effect it means if you broke the business up, sold assets for their book price and paid off all liabilities it's what would be left over.

If they make losses of more than 1.1bn they would be technically insolvent.

They have 40bn worth of mortgages outstanding. of which £23bn are buy to let, 8.5bn self cert, 7.7 bn standard and 'other specialist' and 1bn commercial.

Losses of 1.1bn out of all this in the coming years looks pretty likely to me.

their 'preliminary' results for 2007 are here: page 13 is the balance sheet, page 19 mortgage breakdown.

http://www.bbg.co.uk/bbg/ir/news/releases/...2008-02-13a.pdf

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In plain english, Tangible equity is profits retained from previous years trading. It's not cash, in effect it means if you broke the business up, sold assets for their book price and paid off all liabilities it's what would be left over.

If they make losses of more than 1.1bn they would be technically insolvent.

They have 40bn worth of mortgages outstanding. of which £23bn are buy to let, 8.5bn self cert, 7.7 bn standard and 'other specialist' and 1bn commercial.

Losses of 1.1bn out of all this in the coming years looks pretty likely to me.

their 'preliminary' results for 2007 are here: page 13 is the balance sheet, page 19 mortgage breakdown.

http://www.bbg.co.uk/bbg/ir/news/releases/...2008-02-13a.pdf

Wow! Thanks for answering my question Charlie and explaining that to me.

Being 1.1 bilion away from being insolvent in this climate does not instill me with confidence. The way you have explained it flashes a big red warning sign to stay away from putting any savings with B&B. Shame, their Interest Rates are very good at the moment... but this explains why they are having to offer such good rates.

Anyone have any idea what the tangible assets of A&L are?

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Anyone have any idea what the tangible assets of A&L are?

I'll try and find their latest accounts and do a similar thing, I'm at work at the moment though, so shouldn't really be doing this ;)

My opinion is, anyone offering a very good rate at the moment is only doing it because they need to and they're potentially in trouble. However the FSA have pretty much guaranteed any bank deposit, although until the guarantee is tested we don't know what will happen. My moneys in YBS, NS&I and sainsburys bank (which is HBOS).

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I'll try and find their latest accounts and do a similar thing, I'm at work at the moment though, so shouldn't really be doing this ;)

My opinion is, anyone offering a very good rate at the moment is only doing it because they need to and they're potentially in trouble. However the FSA have pretty much guaranteed any bank deposit, although until the guarantee is tested we don't know what will happen. My moneys in YBS, NS&I and sainsburys bank (which is HBOS).

Yes, it is all very well talkign about this FSA guarantee but till it is tested what will happen is a coin toss. Problem is though, if you have MORE than 35K in any one bank and it went bust then I imagine the likes of the FSA and the Government will say "Well, we told you not to have more than 35K in there".

Those who have STRed and who have a lump sum - I sold the house I inherited from my parents recently - are faced with dilemma of keeping sums over 35K in 'safer' places such as the Nationwide or spreading it around in lots of smaller sums and inevitably having some of that money in the B&B, A&L and so on.

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Have you read how wishy-washy the FSCS actually is?

FSCS Deposit Claims

FSCS (PDF) (Claiming compensation)

To receive compensation you will first need to accept and sign

our offer document, including an ‘assignment of rights’. This

gives us the right to try to recover from the insolvent firm (and

third parties) compensation paid by the Scheme. We will also

try to recover any losses you have incurred that were not

covered by our scheme, and, if we do, will pass them on to you.

After a firm has been declared in default, we generally aim to

pay compensation within six months of receiving a completed

application form. However, delays may occur because of factors

outside our control.

Without searching out the article, the Telegraph or Times reported that no bank had paid funds in to the FSCS since it was created (2001/2002?) when it changed from the Deposit Protection Scheme. For me it's only really envisioned to handle small time credit unions and the like. Not a major bank. And to inspire confidence. Now since NR people are really expecting FSCS to be there to cough up £35K (or whatever it is these days) soon after any bank (ect) fails (and is covered by the scheme).

Good luck. I expect my bank would laugh in the FSCS face if asked to pay up towards bailing out a sickly weak competitor.

However... I'm not entirely dismissing the FSCS. It may have value come some complete meltdown-to-redistribution.

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Alliance & Leicester's latest report

http://www.alliance-leicester-group.co.uk/...f/PP1902084.pdf

Page 11 is worth a laugh, Alliance and Leicester has No sub prime mortgages, no Near prime mortgages, no self cert mortgages and buy to let average ltv is 68%, maximum 85%. Presumably the 85% ignores gifted deposits / cashbacks that we saw in the panorama program.

Page 25 shows breakdown of loan to values.

Mortgages outstanding Residential 41.6bn, buy to let 0.6bn.

They have 2.4bn shareholders funds, of which 1.8bn appears to be the equity equivalent to B&B for a similar amount of mortgages. A&L certainly seem to be stronger.

A&L appear to have better mortgages than B&B (if their figures can be believed), however the main problem with A&L is funding by the money markets

http://www.alliance-leicester-group.co.uk/...f/FR1902083.pdf

Page 14 of above A&L is financed by 30.8bn deposits, 45.2bn wholesale funds of which 18.6bn has duration of less than 6 months.

I don't understand why they hold so much in treasury investments, it could be because of the Girobank side to the company?

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B&B is really lacking in direction IMHO. Are they a bank a financial advisor or what?

I'm getting a good interest rate on my stoozing fund with them though.

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Alliance & Leicester's latest report

http://www.alliance-leicester-group.co.uk/...f/PP1902084.pdf

Page 11 is worth a laugh, Alliance and Leicester has No sub prime mortgages, no Near prime mortgages, no self cert mortgages and buy to let average ltv is 68%, maximum 85%. Presumably the 85% ignores gifted deposits / cashbacks that we saw in the panorama program.

Page 25 shows breakdown of loan to values.

Mortgages outstanding Residential 41.6bn, buy to let 0.6bn.

They have 2.4bn shareholders funds, of which 1.8bn appears to be the equity equivalent to B&B for a similar amount of mortgages. A&L certainly seem to be stronger.

A&L appear to have better mortgages than B&B (if their figures can be believed), however the main problem with A&L is funding by the money markets

http://www.alliance-leicester-group.co.uk/...f/FR1902083.pdf

Page 14 of above A&L is financed by 30.8bn deposits, 45.2bn wholesale funds of which 18.6bn has duration of less than 6 months.

I don't understand why they hold so much in treasury investments, it could be because of the Girobank side to the company?

Charlie,

They claim to have funding until early 2009

http://www.telegraph.co.uk/money/main.jhtm...alliance121.xml

A&L has had to transform its funding arrangements to secure "maturing medium term paper into the first quarter of 2009"

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Charlie,

They claim to have funding until early 2009

http://www.telegraph.co.uk/money/main.jhtm...alliance121.xml

A&L has had to transform its funding arrangements to secure "maturing medium term paper into the first quarter of 2009"

Nice find. The cost of this funding is an extra £150m a year, last years profits were £296mn with only half a years credit crunch in them. 2008 profit will be very skinny, it may well be a loss. Another interesting thing from this is they want to shrink their mortgage book by nearly £5bn (about 10%). With the wreck of northern rock also wanting to shrink it's mortgage book by a half, where are these mortgages going to go?

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Another interesting thing from this is they want to shrink their mortgage book by nearly £5bn (about 10%). With the wreck of northern rock also wanting to shrink it's mortgage book by a half, where are these mortgages going to go?

No one wants these risky clients. They will be made to pay high rates for the priviledge of having a mortgage or be repossessed.

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Page 11 is worth a laugh, Alliance and Leicester has No sub prime mortgages, no Near prime mortgages, no self cert mortgages and buy to let average ltv is 68%, maximum 85%. Presumably the 85% ignores gifted deposits / cashbacks that we saw in the panorama program.

I know Alliance and Leicester have self cert mortgages, because they offered me one!

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B&B is really lacking in direction IMHO. Are they a bank a financial advisor or what?

B&B and A&L have similar profiles to Northern Rock , ex building societies who demutualised and became banks , but they were small compared to the other banks and bigger ex building societies so in order to try to get more market share and grow they had to take on more risk , Northern Rock took the most risk and now there history .

Question is ........how much risk have B&B and A&L taken ?? :ph34r:

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Not that you can entirely believe their data is accurate or up-to-date, but I sometimes like to compare the ratings on UK banks and building societies. Fitch are simple to get data from (some extra data after free registration)... not sure if you can get free access to ratings from Standard & Poor's or Moodys.

Bradford & Bingley

Long Term Issuer Default Rating: A 15-FEB-2008 Affirmed Outlook: Stable

Short Term Issuer Default Rating: F1 15-FEB-2008 Affirmed

Support Rating Floor: BB+ 15-FEB-2008 Affirmed

I just think people are deluding themselves if they believe the FSCS will step with near immediate fat-cheque refunds to make everything better if they have a substantial savings with any deposit taker which has gotten itself in to severe difficulties.

There is nothing absolute for the amount of time it might take receive compensation in the FCSC documents. Wouldn't surprise me if some people could end up waiting 26 years for full repayment/liquidation like the savers in that Isle of Man bank had to.... and come that time £35K might only be a spit of money. Still FCSC better than nothing I suppose.

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  • 292 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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