Top faller in the Banking sector today with a 25% fall are they about to go bust as the housing market stalls .. are they another Northern Rock failure about to blow.

Interesting article on short sellin which explains it better:

"Those who argue for unrestricted short-selling ignore the fact that the system is loaded in favour of the bears. If an individual invests 1,000, or an institution 1m, in the shares of a troubled company because they think in the long term it will recover, they have deployed their capital, and all they can do is wait. There is no more to invest; their resources are finite.
If a short-seller comes on the scene, his resources are in effect infinite because he first borrows the shares he then sells. Given that the revenue from the sale is more than the borrowing cost of the shares, he has no net capital constraint and can continue indefinitely - so much so that in one celebrated case a few years ago, one person shorted 250% of a company's equity, though he did get into trouble for it.

If the target is a bank, the dice are even more loaded. As the selling drives the share price down, two things happen.

First, the rating agencies announce a review of the credit rating, or worse a downgrade. This will force the bank to sell assets to shore up its capital position, and will set alarm bells ringing. At the same time, other banks will get nervous about dealing with it as a counterparty and either curb their business or charge more, thereby weakening the target bank still further.

Short-selling becomes self-fulfilling because the tumbling share price erodes confidence in the bank, and that weakens so it is worth less - until the ultimate cataclysm when people start queuing in the street to withdraw their money, at which point it is doomed and the authorities have to nationalise it.

However, in doing this it is politically impossible for them to bail out the shareholders. So they take the bank over for nothing - or get it rescued at a much-reduced price - thereby wiping out the long-term investors who are the bedrock of the system, handing massive rewards to the short-sellers who have done the damage and leaving the taxpayer to finance the clean-up.

On the way, they have destroyed a business that did not need to be destroyed. So yes. It is time short-selling of banks was banned. "

But say I have a very large load of shares in a company and decide I don't like its prospects and dump them in one go. Then other investors see my trade, review their position and follow suit thus probably dumping their holds. The SP plummets and then I decide that the price fits the fundamentals and buy am I wrong to. The results are similar to the people using derivatives and they are using other peoples shares and paying interest for the loan of the money.

25p today and could go to 15p before a bid appears.

Doubt that , reading on Motley ING possibly make offer before end of week, bought earlier at 26.5 - so not too worried yet ! Looks like all the U.K banks are going to be owned by foreigners shortly. U.S get there fingers out and another take over and we'll see the crazy deals of last week - here's hoping:-)

After hours RNS could boost the sp in the morning:





RNS Number : 1345E
Bradford & Bingley PLC
23 September 2008





Bradford & Bingley plc



Bradford & Bingley and GMAC-RFC announce new terms for mortgage agreement

Bradford & Bingley (the Company) and GMAC-RFC confirm today that they have successfully
renegotiated the terms of their mortgage forward
sale agreement.

Under the original terms of the agreement, signed in December 2006, the Company agreed to
purchase a minimum of 350m of UK mortgage
assets per quarter, with 1.75bn remaining to be purchased before the end of 2009.

Both businesses have agreed to revise the terms of this agreement to their mutual benefit
whereby 500m of loans will be acquired in Q4
2008 and between 225m and 250m in Q1 2009 after which the agreement will cease. GMAC-RFC
will receive in lieu, the equivalent of the
premium that would have been paid should the agreement have run the full term.


ENDS

Still far too risky to buy..

Agree with Mitzy. Tempting, but I think further to fall. 15p could be worth a punt.

why would it be worth a punt at 15p but not now ? Personally got in at 24p yesterday and would be seriously concerned of loosing my money if it fell to 15p as far more likely to hit the wall than when hovering around its current base. Can't get my head around some of the numbers people come out with to justify their actions

No one seems interested at take over at 25p my thinking is at 15p a takeover would be cheap price to snatch it. moe likley BB will fail as NRK IMHO

maybe not but i don't see any immediate fear that they will go bust either. Im sure there will be another relief rally when the US gets their finger out and they approve the bail out plan. I will sell into that rally.It was impossible to jump on to it last time so taking the chance of positioning myself early. If it falls to 15p ill double my already sizeable holding as funding model somewhat different to NR

The thing that worries me about taking a punt and hoping a for buyout is that they have lots of iffy loans self certified etc

Fitch rating has been cut...very dodgy even if it goes to 15p.

Its a sorry state that when I started this thread BB was trading at 250p and now look at them..23p.

another dopey lot from yorkshire......bradford, halifax

At least we have a bank.

seem to remember you were careless enough to lose yours last week ...


;-)

it was halifax that brought it down u dimwit!!!! bank of scotland was fine until halifax guys tok over.....none have knowledge oif banking. wake up and have some knowledge on matter before making flippant comments.
oh.....and what u going to do about pensions....and currency

ah, i forgot u r a dealer.....not really interested in structure of a country......probably one of the many apethetic people in this woeful country these days......no wonder more and more brits r leaving

and it was nothing to do with being careless.....it was idiots in city making up false rumours (as usual) about hbos lending capability. hbos is highly profitable company....more than 5 billion profit in last statement.

your comments make u out to be a moron, dealer

thats like saying......at least scotland has scottish people in its football team.......whereas england has africans or wherever they come from

Just say NO..

10% down again this morning BB could soon be HMG.BB