Not sure if this thread will catch on, because no-one here seems to have much to say about individual british banks, but thought i would add this header to see if we could discuss dividend yields, exposure to sup-prime, good ones, bad ones, take-over targets, when the crisis will end? do you think they have learnt their lesson? I, for one, as a property developer have seen first hand how much stricter they have become with lending habits, struggling to get decent rates for re-mortgaging, basically they appear scared to lend to anyone.

Very interesting weekend on the secured lending front.
A whole raft of new product has been launched across the market. Nothing earthshattering, but a slight lowering of rates, or of tracker margins, or of SVR.
Then today we have Merrill Lynchs' UK commercial landing arm closing its doors to new business and RBS deciding not to accept any more Buy To Let applications from "professional" landlords. Amateurs only should apply.
What this signals, I haven't worked out yet, but I'll be speaking to those who know better than I!!!!

Hot off the press.....
Merril Lynch's UK sub prime residential arm is no longer accepting applications for secured lending.

I have copied and pasted a shares article written on 16th August 2007, it draws heavily from Sandy Chen from Panmure Gordon. It's well worth reading because it shows that at the time he really had a grasp of future problems instore for banks.

Published date:Thursday, August 16, 2007

UK banks have been slow to confess how exposed they are to the current bad debt crisis but an apocalyptic note from stockbroker Panmure Gordon suggests they could have around 80 billion of loans at risk.

Banking analyst Sandy Chen says these debts are wrapped up with many others in exotic packages ranging from Credit Derivative Products (CDPs) to Asset Backed Commercial Paper Obligations (ABCPOs)

Too much cheap money has resulted in over-lending to high-risk borrowers. Worst of all, the banks dont know what is in the various packages and the extent of their liabilities. The Bank of England last month instructed the clearing banks to clean up their act. They were given the quarter day as a deadline (September 31) to identify and write-down bad debts. Some of these loans will have to be taken on board by the banks.

Chen says the European bank with the largest exposure is Dutch giant ABN Amro with 27 billion. So buying the bank for around

40 billion could prove a poisoned chalice for bidders Barclays (BARC) and Royal Bank of Scotland (RBS).

Barclays is already up to its ears in dodgy debt, says Chen. He estimates it could be owed 25 billion substantially more than its capital reserves of 19 billion which would make it the most exposed UK bank.

RBS is relatively safe with only 6 billion at risk, representing a sixth of its capital. Lloyds TSB (LLOY) has 11 billion poor quality loans only a fraction under its 11.5 billion capital. HBOS (HBOS) has

20 billion and 22 billion capital, while giant HSBC (HSBA) is not too exposed at 15 billion against 55 billion capital, according to Chen.

The good news is that probably just a fifth of these low-quality loans will never be repaid, totalling some 15 billion and spread over several years. But banks will need to raise extra capital from rights issues and/or selling stakes to better capitalised competitors in the Far East.

Chen has had to field some irate phone calls from the banks after his estimations. The problem is there is no disclosure. There is a lack of clarity about their ABCPOs and likely asset impairment charges. The over-arching risk is the drying up of liquidity. The banks will probably have to use their cash to top up their own products, which means less to lend to companies, he said.

Shares says: A fully blown financial crisis is still unlikely but the banks will come under more pressure.

My reason for posting the above at this time, is because of Panmure Gordon ( Sandy Chen ) latest reccommendations. Firstly RBS which they have as a sell with 195p price target, Second BB. which is a sell and price target of 135p.

Position they have on banks are below, to the best of my knowledge, please correct me if any are incorrect.

RBS, 23 April, Sell, Price Target 195p.
BB., 24 April, Sell, Price Target 135p.
HBOS, 30 April, Sell, Price target 350p.
BARC, 19 Feb, Sell, Price Target ?????
LLOY, 7 May, Hold, Price Target ?????
AL. 20 March, Sell, Price Target ?????
HSBC, 28 Jan, Sell, Price Target ?????

I will certainly keep a close eye on his updates and opinion.

Looks like Mr. Chen did good research or had an excellent crystal ball!

I hope his crystal ball is still working, I was looking at RBS with a view to purchase at some point. But will hold off and follow Mr Chens recommendations closely.

More hot off the press news.
Several large lenders are to reduce fixed rates this week, including Nationwide and Halifax, while Skipton is offering a USA LIBOR tracker.
As I stated previously, this is a signal of the lending market starting to be more competative. When margins are so tight that further reductions are not economically viable, then criteria relaxing will start, in order to attract business.
Rates offered are as 5.85% or less for medium term fixes, with small fees and there is little margin left after that.
A report from Hometrack has also caught my eye. It claims remortgage volumes are down only 3% and that the mortgage market remains healthy. It goes on to say a wide disparity between lenders performance is hiding the true overall performance and that the media are making a potentially bad situation into a crisis by creating a self fulfilling prophecy.
Overall, I am confident the worst is behind us, and it is not as bad as the reports would have us believe.
Time will tell.

Suggest you read RNS today released by GFRD which gives their view of the new build housing sector.

New build always suffers more and longer than any other sector of the market due to the simple fact they overprice their houses by as much as 20%, and many have business models that rely on investors buying off plan over the last decade or so.
It is the first area lenders turn the screw on, by reducing available LTV.
This has been magnified in this cycle because a larger percentage than ever before of new builds are aimed at first time buyers, who have no equity from previous purchases, and so restricted deposits.
The lending market as a whole has not yet suffered the meltdown many predicted, and now looks unlikely to. When the lenders recover confidence, so will the housing market. When that moves, so will new builds, but they are quite aware they are last on the list.
Lenders keep saying the same thing to me. They have more applications than they can deal with and so are cherry picking the lowest risks and keeping margins high. New build is high risk lending.

If that is the case why do the banks finance the builders building new houses?

Think you will find most new builders only working on existing sites. Banks in a pickle because their greed on exotic "trading portfolio assets" has stretched their own capital resources and until these rebuild they just do not have the funds to support other than the bare minimum (and most profitable) of deals.

Halifax,
The banks have the problem that not financing the builders means builders going bust, owing them a fortune. Their finance to them is not being extended and the conditions are more onerous. The builders are not starting new developments, but do need help with completing existing ones.
This is why some sites can offer 90% mortgages through a particular lender when the lender only lends to 75% on new builds generally. Its a case of risk management, and the risk of the builder going under is higher to the bank than the risk of a few dozen borrowers defaulting.

Partridge,
Most big lenders are reporting higher volumes of lending. The issue is there are fewer lender to share the burden. 2007 saw 150 Billion of secured lending. Since then lenders responsible for 52 Billion of that have closed their books.
The higher volume of applications they are therefore dealing with is causing problems of service as much as money. To counteract this they make their rates and criteria unattractive, leading to a lower level of applications. This keeps service standards high (as demanded by the FSA), margins high and has the added advantage of ensuring they do not over commit or take unnecessary risks.
As service levels normalise, and the higher margins make more money available, lending will relax, but new builds will still be bottom of the pile until surveyors regain confidence in house prices in general.

Interesting that Redrow are placing particular emphasis for its poor performance on restricted lending policies. They also say cancellations are over 20%.
I would suggest that these cancellations are not due to people not wishing to buy. They are due to speculators buying off plan and then cancelling because losing the deposit is cheaper than selling at less than they would pay, or because they cannot get a mortgage for the balance, and FTB who deposited early, when 100%+ lending was available, only to find they now need a 25% deposit they do not have, or that on valuation, the surveyor is undervaluing the property and the buyer and builder cannot agree a new price.
All IMO.

Thanks for the target price. I feel the banks will drop much further.

Some banks are less exposed to the domestic property market than others but they all get "tarred with the same brush".

BB. today issued rights issue in spite of the statement below just a month ago.


Bradford & Bingley PLC
14 April 2008

Bradford & Bingley plc

Statement

Contrary to press speculation today, Bradford & Bingley announces that it is not
intending to issue equity capital by way of a rights issue or otherwise.
Bradford & Bingley has a strong capital base, above its regulatory requirements,
and as a result of the Board's conservative approach, has funded its business
activities through 2008 and into 2009. In the current market environment, the
Board will naturally continue to monitor closely the balance sheet strength of
the business and its funding plans.

As previously announced, Bradford & Bingley will release its Interim Management
Statement on 22 April.

82p per share...this is bad news. Trading continues in line with the April trading statement and interim dividend paid in shares?? Looks like BB. has run out of cash.


Bradford & Bingley to raise 300 mln pounds in 16 for 25 rights issue at 82 p/shr - AFX

LONDON (Thomson Financial) - Bradford & Bingley Plc. said it will raise about 300 million pounds, net of expenses, in a 16 for 25 rights issue at an issue price of 82 pence per share.

This represents a 48 percent discount to the closing price of 158.75 pence per share on May 13, the UK mortgage lender said.

It added the proceeds of the rights issue will strengthen the group's capital position and mitigate the impact of the previously announced reductions in the value of some of its treasury investments.

The rights issue has been fully underwritten by Citi and UBS Ltd, Bradford & Bingley said, adding it has also revised its target Tier 1 ratio range to between 8 percent and 10 percent.

The company also said the 2008 interim dividend, due in October, will be paid in shares.

It added trading continues in line with the April trading statement.

"the 2008 interim dividend, due in October, will be paid in shares."

Which means all share holdes end up with the same percentage of the company as they had before - so, what's the point? Why not just cancel the dividend?

Conserves cash for the company,shareholders can sell the divi shares in the market if they need cash.

True hlyeo98 it is bad news but at least we know at which level the underwriters are prepared to underwrite the stock. I expect they have made some strict assessments on future risks. Income funds will not be too pleased either about the dividend situation. Goes to show that not all high yielders are necessarily cheap. Still the rights issue may help draw a line under them and they may be a candidate for take over once it is felt the week housing market has been discounted sp 145p.I am not a holder at present.