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Hbos Hit By Profits Slump And Writedowns (forecast)

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Mortgage giant HBOS whose share price has fallen so sharply that private equity groups are considering a break-up bid, is expected to reveal more hefty writedowns this week when it publishes its interim figures.

Half-year profits are forecast to drop by more than 50 per cent to £1.3bn, the numbers pulverised by provisions to be taken against investments in US sub-prime mortgages and other financial products. HBOS is also expected to disclose impairment charges linked to a rising tide of repossessions of British properties that have slumped in value in the past year.

One analyst said: 'Arrears are rising and that points to a big upswing in foreclosures further down the line.'

Institutional investors fear that HBOS and other banks may need to raise more funds by year-end as Britain heads for a recession, according to forecasters.

HBOS has already raised £4bn from a rights issue largely left with the underwriters last week; Barclays has raised capital by seeking the support of Middle Eastern sovereign wealth funds.

Elsewhere, Bradford & Bingley is tapping shareholders for £400m, Paragon is seeking private equity support, and RBS has raised £12bn from a rights issue.

It is not clear how easy it will be for banks to further shore up their balance sheets - analysts say there is a diminishing appetite for more bank shares among foreign and domestic investors. That leaves the option of asset sales, but that could be tricky in a falling market when asking prices are depressed.

Shares in the big British clearing banks have fallen 35 to 50 per cent in the past six months. HBOS's share price is trading below the company's book value.

Spanish bank BBVA and National Australia Bank have been reported as possible bidders for HBOS. Now, private equity groups are considering 'clubbing together' to bid, City sources say.

No decisions have been taken and one obstacle may be the Financial Services Authority, which is worried that a takeover by venture capitalists of Britain's biggest mortgage bank could further destabilise the UK banking system.

On Friday, Citigroup issued a report in which it said that it expected Britain to fall into recession in the second half of the year. It also forecast that the banks may need to raised another £24bn in the event of a 1990s-style housing crash.


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  • 399 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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