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B&b Seen As Most Vulnerable

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http://www.ft.com/cms/s/0/67f14304-ecb2-11...00779fd2ac.html

B&B seen as most vulnerable

By Peter Thal Larsen

Published: March 8 2008 02:00 | Last updated: March 8 2008 02:00

A downturn in the housing market would affect all British banks, but it would not affect them equally. Leigh Goodwin, of Fox-Pitt Kelton, calculated the impact on UK banks' profits under three scenarios: if prices remain flat for the next two years, fall by 10 per cent, or fall 20 per cent, writes Peter Thal Larsen .

Under his calculations Bradford & Bingley is the most vulnerable to a slump. Even if prices remain flat, B&B's provisions for bad loans are expected to double to £34m, or 10 per cent of profits, in 2010. In the worst case, this could reach £301m, or 85 per cent. Alliance & Leicester and HBOS would also suffer if prices fall.

But banks with a broader range of businesses outside the UK would be less affected. The impact on HSBC, Barclays and Royal Bank of Scotland would be minimal if house prices remain flat. Even if they fall 20 per cent, provisions for bad loans would only knock 3 per cent off HSBC's profits in 2010.

Will they have to nationalise B&B ?

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The concern has to be B&B's liquidity and the extent to which it relies on short-term funding. The fact that it survived the NR run suggests that it does not have the same reliance on it otherwise it would have been hit in the panic.

Companies can be unprofitable and lose money for years, but as long as they retain liquidity they can get through a loss making period.

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The concern has to be B&B's liquidity and the extent to which it relies on short-term funding. The fact that it survived the NR run suggests that it does not have the same reliance on it otherwise it would have been hit in the panic.

Companies can be unprofitable and lose money for years, but as long as they retain liquidity they can get through a loss making period.

B&B and A&L look prime candidates for take over as their profits and share value slowly slide. Both have good branch networks and large customer bases that would make them very good long term investments - at a suitably low price.

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B&B and A&L look prime candidates for take over as their profits and share value slowly slide. Both have good branch networks and large customer bases that would make them very good long term investments - at a suitably low price.

Enter Warren Buffet?

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I have been toying for about 8 weeks now with putting money into B&B but just can't bring myself to doing so as I just have a gut feeling that they are the highest risk. Having said that, I also think someone like Lloyds will take them over before they do a NR. I have a feeling that Lloyds are simply watching the share prices of both B&B and A&L tumble with an eye on taking one of them over. Then again, if house prices fall by 20% or more perhaps the debt of B&B will be so great that it will not be at all attractive to any bank.

Having had a really bad experience with Alliance & Leicester in the past week - have now taken all my money out of them apart from an ISA which I am now looking for a new home for - I simply have no confidence in them as a safe place for my savings. I've also been reading on this forum and on the MSE forums quite a lot of people writing about bad experiences trying to open B&B accounts - things like their cheques not being cashed for weeks, etc.

I am a bit concerned about HBOS as they seem to be springing up more and more as a worry and their share price has tanked. I know they are a big mortgage lender but did not realise that they had been perhaps lending a lot of subprime? Then again, in 2001/02 they offered me a half a million pound mortgage and I, thankfully, laughed at such a ludicrous offer as being stupidly over the top. I had hoped HBOS had diversified more but their attempts at becoming a big player bank seem to have simply stopped and they appear to be just a big lender of loans and mortgages as far as I can make out so, yes, perhaps this is why they are at risk.

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  • 295 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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