Nationwide Is ‘not The Lender Of Last Resort’

[abharrisson]

That's what I was thinking. Members should let the nationwide know know they feel about this. WRITE TO THE NATIONWIDE NOW OR RAISE IT AT THE AGM.

They really shouldnt be doing this. Its just wrong.

Amazing isn't it... if was just the cheshire then that wouldn't be so bad, as they are very small and have effectively been weakened by one deal (although you have to question the rest of it if their board takes on junior debt of that magnitude when they know that it going bust would casue extreme difficulties).

The crux is the £1.4bn of sub-prime loans from derbyshire... I believe that some of these were bought from GMAC who wrote some pretty dicey stuff (and some not so dicey stuff) but surely Nationwide have little experience of managing sub-prime books so they are not going to add anything there and with the rush (I can't believe this has been months in the planning) I doubt they have had the time to fully audit the situation.... so 3+ arears at 9% may well be the tip of the iceberg. I know Nationwide is huge but not so huge they can withstand very heavy repossessions against a £1.4Bn book.

I had a further thought.... Northern Rock was supposed to be bad and Branson or whoever was offering something like a BN or more overall for it..... Nationwide has effectively taken over Cheshire and Derbyshire for Zero.... I suppose though its not strictly as straightforward as that as members of cheshire and derbyshire have not given up ownership as they will now effectively own a slice of Nationwide through memebership........ although current Nationwide customers might feel miffed that these guys have weakened the existing Nationwide at the same time as diluting their original "share" by adding to the memebership numbers.

I'm fairly sure the bank of england and the fsa have learned their lesson and they have plans which have already been out into practice or could be to help the big retail banking operators should trouble emerge... we were told of the special liquidity funding but doubt we know the true scale or how far the BOE and treasury and FSA are going to go to ensure the whole thing doesn't collapse..... I suppose the one silver lining is that Nationwide is a building society and therefore won't suffer from short selling exposure in the way other banks could (I suspect lehmann are feeling the full force of that right now)

[Jonesy]

Nationwide

1/ What makes them think with NO experience of sub-prime books that they'll be able to manage the situation better than derby shire.

That's a very interesting point because whilst Nationwide does not handle the more risky sectors itself, I believe it owns two companies that specialise in that part of the market - UCB Home Loans which provide Self Cert loans and "The Mortgage Works" which specialises in Buy-to-let and near-prime.

http://www.ucbhomeloans.co.uk

http://www.themortgageworks.co.uk

[Edit] Links didn't work.

Edited September 9, 2008 by Jonesy

[Sonic the Hedge Fund]

I suppose though its not strictly as straightforward as that as members of cheshire and derbyshire have not given up ownership as they will now effectively own a slice of Nationwide through memebership

The press release says C & D memebrs will not get the same mebership rights as NW members. It looks like C &D will continue to run as indipendent BS but with funding support from NW

£1.4Bn sub-prime is tiny, NW current total loan book is £142Bn.

NW desperatly need the debt assets, as their loan to deposit value is currently 117% i.e. they have 17% more deposits than loans

[Guest happy?]

The Derbyshire looks like a basket case - less than 40% of their loan-book is prime residential. Assuming prime residential property falls 25% in value (can't think where I've heard this figure quoted recently) you can see why they ran to the big boys. Some seriously poor investment decisions and sadly completely unnecessary - any small building society with a sensible lending policy might eventually find itself unable to achieve the economies of scale needed for long-term independence - but reckless gambling just means you don't get to choose your suitors

Nationwide Derbyshire Cheshire

(Apr-08) (Jun-08) (Jun-08)

£Bn % £Bn % £Bn %

Prime

Residential 105.5 74% 2.0 37% 2.4 64%

BTL 8.5 6% 0.9 17% 0.4 11%

Self - Cert 5.1 4% 0.6 11% 0.2 5%

residential

Near and Sub- 0.5 0% 1.4 26% 0.2 4%

prime

Commercial 20.3 14% 0.5 9% 0.6 16%

Consumer

Finance / 2.9 2% 0.0 0% 0.0 0%

Other

Total Loans 142.8 100% 5.4 100% 3.8 100%

These figures from here:

http://www.nationwide.co.uk/latest_news/de...b_info_08092008

Apologies if the formatting's poor - copied from PDF

[Guest happy?]

The Derbyshire looks like a basket case - less than 40% of their loan-book is prime residential.

In fact the more I look at it the more I wonder if the Nationwide didn't cut a deal with the FSA - we'll take the Derbyshire if you chuck in the Cheshire....