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.

The widely anticipated BOE 50bn facility announcement seems to have had little effect. It will be interesting to see which bank is brave enough the use this facilty first in a large way, would it not be the same as Northern Rock going to the BOE last year, then when the news broke it caused a lose of confidence in the bank. Another possible danger might be that a bank that uses this facilty first may be heavily shorted, because they could be seen to be the weakest link.

I would imagine that banks would rather go down the right issue route, rather than to the BOE, also I have read the terms are fairly stringent.

This is bad news for the banks.

Just back from a conference involving some of the banks. Very interesting views.
We were banned from using the word crisis, which speaks volumes in itself, but there was some interesting bits getting said.
A large Building Society claims it is not even near a crisis. It was simply a long overdue market correction.
The banks are all saying the same about the 50 Billion though.
The overall lending of the lenders who have withdrawn from the market or folded amounted, last year, to 52 Billion. Therefore, even if the UK banks took the entire BoE offering, it would still not be quite enough to make up for lost market players.
More to the point, the BoE is a central bank, and therefore the money is not ringfenced for UK lenders. It is available to any lender, anywhere in the world, subject to the banks status.
The problem for the banks is not a lack of money, or even really capital adequacy. It is the end of the merry go round of moving money. Perversely, this may benefit banks, if it goes on long enough.
Let me explain. A bank lends money on a 2 year fixed rate. It thoroughly expects that 2 years later, the loan will be repaid in full as the borrower moves elsewhere, and so the redemptions coming in make up the bulk of the money it needs for new lending that month. The rest is raised through LIBOR, or bank reserves.
Now, LIBOR is too expensive and reserves are low, but worse, people are not redeeming their mortgage. This causes a problem because the fees associated with the new mortgages are where lenders make their money. No new mortgages equals no new profits, but the ones staying with them pay a much higher rate and so profitability comes, just much more slowly. Perhaps 18 months rather than straight away.
Either way, they do make money, but it is a conundrum as to whether they want to end the problem now, or not.
Finally, they think that we are heavily dependant on USA sentiment and that will change with a new president in November, though it may take up to 6 months after that for the benefits to migrate across the atlantic.
Very interesting day.

Wish it was as simple as that, the underlying problem is that financial institutions are still unable to put a value on the various derrivatives they are holding as there is little or no market for this dubious paper. Hence the ongoing need to make massive provisions. Injecting liquidity into the market will not in itself make these " dud" pieces of paper any more valuable until confidence returns to the market.

Interesting post Alan as always. What really concerns me is that if Sir Fred Goodwin and his team think there is no need for capital raising in February (and I believe they were genuine at that time) then find the need 12BN or more a couple of months later, they really do not have a clue what is going on within their business. The numbers for the various financial instruments are so vast against the banks capital bases that who knows what will happen next. Suspect it will all come right in the end, but the bonuses taken by some of these guys over last few years, whilst driving their business in what now appears to be an uncontrolled manner, make a grumpy old man like me very angry.

Why has AL. drop 50p today? Is it a likely candidate for rights issue next?

partridge---I think pressure by the chancer, sorry chancellor was instrumental in the rights issue.

hlyeo----ex div + general trend down.
2517

hyleo,
general consensus within the industry is that Barclays will be the next to pop their heads above the parapet.
They are certainly the ones closest to breaking the capital adequacy rules.

BARC didnt pursue their bid for ABN/AMRO and overpay like RBS did, Fred the shred should go and take his megalomanic style of management with him.

HBOS won't be far behind Barclays, I wonder how prudent the share purchases will look by the board of HBOS in a few months time. They will need to dip into there pockets again after a rights issue. I believe the AGM Statement is due soon, it could make interesting reading re any writedowns.

Shock, Horror!!!!

I have just been discussing the current mortgage crisis with a lender (not a bank), who must remain nameless for confidentiality purposes.
They are telling me something that goes totally against everything in the industry.
They have actually said they have plenty of money available to lend, but too few applicants for the money.
They are a balance sheet lender, unexposed to the LIBOR turmoil, but it was an astonishing thing to hear. Does this mean the UK appetite for spending someone elses cash has disappeared? That would be a bigger issue than any credit crisis.

Sounds like nonsense to me , they would say that wouldn't they!!

Think what you like, halifax.
I am in the industry, I know these people, I am not in any way connected, they have no reason to speak nonsense.
They are a balance sheet lender. This is a very different animal to the leveraged lenders.
I see material from banks restriciting criteria and lowering LTV's. I see material from these guys offering more considerate underwriting and special offers to attract borrowers. They are very niche with their products, but the niche is to attract serial non payers, unusual properties and "outside the box" lending. Just the areas that should be booming.
Anyway, you know best.

Lending to serial non payers sounds good to me!!

hewittalan6. on what terms would this niche player be lending. It is no secret that the consumer is being squeezed, and perhaps many have now finally learnt that they must cut their coats according to the cloth. I do not doubt what your contacts say but I suspect that the money is not cheap.

Guscavalier suggest you try John Charcol.

You're right, Gus. The money is not cheap, but their lending falls into 2 categories.
They offer the unlimited adverse stuff which is used as a last chance saloon. I expect this particular bar to be full to overflowing by now. If you face the choice of repossession, or a change in lender and higher rates, most people (rightly or wrongly) try to rescue the situation by moving the loan. Usually this just puts off the inevitable, but the lender makes money.
The other arm(s) offer rapid financing for smaller developers and speculators. Traditionally, this is more risky, but with high rewards and other lenders would not go there due to the risk factor.
So in truth, though they are costly, the rewards are high and those using them know that. The odd % made little difference.

As for Charcol. Watch this space. Suffice to say that small brokers with very low overheads are struggling and reigning in spending. How would they manage if they had impressive head offices and huge amounts of backroom staff?

I am surprised there is any lending ( ie still standing), with piles of cash about. Add-in that is is not LIBOR ( mentioned here) and we have to conclude this is Savers' Deposits. . . . . i.e. the traditional BS model.

I'm not surprised folk are avoiding moving house ( with all the charges that involves) - particulalrly if all they are doing is move up-market. Stayiing put and building an extension, or having a last-minute foreign holiday - are "sweeter" ways to spend far less.

(This ignores folk who have to move for Job-reasons, but I suspect these are relativly few and many are assisted by the employer).

Therefore, it looks like traditional BS model is still working . . . so what is the issue with UK-Banks?
1) Banks are not lending to each other, fearing the borrowing bank's defaults may reduce their ability to repay loans.
2) They appear to have a large number of Mortgages on their books, some if these may turn bad - let's suggest this is about 5% - more than enough to wipe-out any profits.
3) The BoE ( or the Labour Government ) - wants to "do something" and the Banks have suggested the BoE takes-on these Mortgages......in exchange for cash....which (presumably) they can lend out at current/higher rates . . . . . thereby making up for their stupidity and losses on these Mortgages.

It seems to me that if Banks want to be shot of their Morgages - and the BoE is willing to provide Cash - We'd better take cover!

This is likely to end-up costing the Public far more.

IMHO Banks should NOT be allowed to continue to trade in this "profit-driven" risk-ignoring manner......it is self-evident that NRK was more than a wake-up call - it demonstated that Bankers are potentially grossly incompetant - it remains to be seen where the blame lies, but I like to follow the money - who was being paid the most? Which employees benefited from these Mortgages which were not backed by long-held cash?

Grr!

Hangon,
The lender i mention is not BS based, nor is its business, beyond that I say no more, other than it is deposit based.
The BS model does work though, and this is evidenced by the regional lenders who were offering loans across the UK who are now offering broadly similar product, but only at a local level.
Perhaps the argument was whether the capital adequacy requirements were wrongly set. They are at 4%. Any higher and the whole UK system would be doing either a NRK or as RBS, or, more likely, lending would have been stricter, earlier. If they were lower, the LIBOR markets would be freed up.
Trying to remember the figures from Tuesday, but the banks were arguing that we will not follow the USA to the same degree because secured lending in the UK accounts for about 1 Trillion, compared to about 3 Trillion in security, whereas the ratio for Uncle Sam is much higher.
Can't remember the figures exactly, so forgive me, but it would take much more here to create a situation where secured debts started to look insecure.

I think the banks have had their wake up call Hangon. The fact that they have /or will be asking shareholders to subscribe to rights issues means that, quite rightly, the risks are shared with shareholders as well as the taxpayer. The outlook has changed and they cannot afford to go back to the lax ways of doing business. There will be no difficulty of obtaining funds where a good level of security is involved but, I believe, it will continue to get more expensive for riskier business. This is how it should be and how it used to be. Once the dust settles it will be a good time to invest and we may then see more sovereign wealth fund interest. All we need is some good timing.(easier said than done).