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Banks bailout: Bonds tumble as Government admits no cap on taxpayer risk

January 19, 2009 by Infinite

Bank shares plunged and Government bonds tumbled after Gordon Brown announced plans to insure lenders for losses on bad loans which could amount to billions of pounds.

The Prime Minister announced a scheme to allow banks to exchange cash or shares for a Government guarantee on their “toxic” debts, transferring any losses they suffer from the banks to the taxpayer.

But the Government has conceded that it can’t estimate how much taxpayers’ money will be on the line in the latest bank assistance package.

UK bond prices fell sharply as the financial markets digested the prospect of further Government borrowing. Bank stocks also tumbled with shares of Royal Bank of Scotland losing more than half their value. Lloyds, Barclays and HSBC also fell.

Ministers say the new package, which comes only three months after another £500 billion bailout, is vital to restore bank lending and help companies get credit and stay in business.

HSBC, Credit Suisse axe jobs as London Scottish Bank collapses

December 2, 2008 by Infinite

The economic downturn delivered another battering to the UK’s financial services sector yesterday (December 1st), with HSBC and Credit Suisse announcing major cutbacks and the London Scottish Bank collapsing into administration.

Darling summons bank chiefs over rate cut failure

November 7, 2008 by Infinite

Alistair Darling summoned the chief executives of Britain’s biggest banks to Downing Street today to demand that they immediately pass on the Bank of England’s interest rate cut to their customers.

Treasury sources confirmed to The Times that the Chancellor told the heads of all Britain’s big high street lenders – including HSBC, Barclays, Lloyds TSB, HBOS Nationwide and Abbey – to implement rate cuts immediately.

Yesterday, the Bank of England slashed interest rates by 1.5 per cent to 3 per cent, the lowest level in 54 years, and today, the shock reduction helped to ease the strain in nervous money markets.

Libor, which is the rate at which banks lend to each other and is key for pricing mortgages, fell by more than one per cent from 5.561 per cent to 4.496 per cent.

However, the figure remains almost 1.5 per cent higher than the official interest rate.

The spread between the Bank of England’s borrowing cost and the rate that banks charge to borrow money over a three-month period – a key measure in the wholesale money market – is the widest since October 22. The day before, Mervyn King, the Governor of the Bank of England, publicly acknowledged for the first time that a recession in the UK is now likely.

Wall Street halts futures trading amid panic

October 26, 2008October 26, 2008 by Infinite

Stock markets across the world cracked yesterday, forcing Wall Street to suspend trading on a key futures contract to stem panic-selling while Moscow shut for business altogether.

Sharp losses in New York, London, Europe and the Far East raised the spectre that governments may be forced to impose emergency holidays to avert a meltdown across world stock markets.

Before Wall Street opened yesterday, American regulators suspended all trading of Dow Jones futures contracts, which had plunged. Such contracts allow traders to bet on the future direction of the Dow Jones index. The plunge had triggered an automatic circuit breaker, which halts trading to prevent a market sliding into freefall.

Nouriel Roubini, Professor of Economics at New York University, said that his prediction earlier this week that markets would have to be shut down is already coming true.

He said: “This morning, even before the markets in the US opened, the S&P futures fell by more than their daily limit. What I said yesterday has already started.”

A forced closure of stock markets in America would respresent the first time that Washington would have shut Wall Street since the terrorist attacks of September 2001. It would also have echoes of the 1930s, when President Franklin D. Roosevelt shut American banks during an enforced holiday.

UK: Government to save HBOS and RBS

October 12, 2008 by Infinite

Government set to become biggest shareholder in top banks as Japanese weigh bid for Morgan Stanley

THE government will launch the biggest rescue of Britain’s high-street banks tomorrow when the UK’s four biggest institutions ask for a £35 billion financial lifeline.

The unprecedented move will make the government the biggest shareholder in at least two banks.

Royal Bank of Scotland (RBS), which has seen its market value fall to below £12 billion, is to ask ministers to underwrite a £15 billion cash call.

Halifax Bank of Scotland (HBOS), Britain’s biggest provider of mortgages, is seeking up to £10 billion.

Lloyds TSB, which is in the process of acquiring HBOS in a rescue merger, wants £7 billion, while Barclays needs £3 billion.

The scale of the fundraising could lead to trading at the London stock market being suspended. This would give time for the market to digest the impact of the moves.

U.K. to Protect Bradford & Bingley; BBC Reports Nationalization

September 28, 2008 by Infinite

Sept. 28 (Bloomberg) — The U.K. government will act to protect Bradford & Bingley Plc customers, Chief Whip Geoff Hoon said after the British Broadcasting Corp. reported the country’s biggest lender to landlords will be taken over by the state.

Prime Minister Gordon Brown and Chancellor of the Exchequer Alistair Darling “have worked right through this weekend to sort out the problems we’re facing,” Hoon, a parliamentary officer, told Sky News today. “I’m confident that in due course there will be a statement from the Treasury about Bradford & Bingley. We will act to ensure that the interests of depositors are properly protected.”

The government will take control of Bradford & Bingley, whose shares have tumbled 93 percent this year, the BBC reported on its Web site, without saying where it got the information. The Treasury and Financial Services Authority will negotiate with banks interested in buying parts of the Bingley, England-based bank, the BBC said. Possible buyers include Banco Santander SA, HSBC Holdings Plc and Barclays Plc, the report said.

Jobless set to top two million as the UK economy heads for meltdown

September 14, 2008 by Infinite

A JobCentre office

The true scale of the jobs disaster facing Britain is revealed today as experts issue dire warnings that up to half a million workers will lose their jobs over the next two years, as companies cut costs and scale back investment plans to survive the economic downturn.

Official figures are widely expected to reveal this week that the number of people out of work and claiming benefits increased for a seventh successive month in August.

Finance companies based in London’s Square Mile have already laid off thousands of workers since the US mortgage crisis unleashed chaos in the world’s markets last summer; and the 5,000 UK-based staff at crisis-hit investment bank Lehman Brothers are awaiting news this weekend about how many of them will be made redundant.

Beijing swells dollar reserves through stealth

August 26, 2008 by Infinite

China has resorted to stealth intervention in the currency markets to amass US dollars, using indirect means to hold down the yuan and ease the pain for its struggling exporters as the global slowdown engulfs the economy.

A study by HSBC’s currency team in Asia has concluded that China’s central bank is in effect forcing commercial banks to build up large dollar reserves, using them as arms-length proxies in a renewed campaign of exchange rate intervention.

Beijing has raised the reserve requirement for banks five times since March, quickening the pace with two half-point rises in late June.

HSBC warns that financial crisis will spread to Asia

August 5, 2008 by Infinite

Asia will be infected by the economic weakness spreading through the world’s leading economies, threatening the engine of global growth, HSBC has warned.

Cashing in on Hong Kong gets harder

Speaking after reporting a “resilient” 28pc fall in pre-tax profits to $10.3bn (£5.2bn) for the six months to June, despite incurring a further $10bn of bad debt, Stephen Green, HSBC chairman, said: “I don’t believe the emerging markets have completely decoupled. There is no way a serious downturn in the US will leave Asia immune.”

HSBC, the world’s third largest bank, still expects the region to grow but it will be “with less momentum than in the recent past” because of rising inflation in the face of commodity price pressures.

Analysts at Exane BNP Paribas warned that the Asian outlook “provides the greatest threat to HSBC’s premium valuation” and that “some of the gloss has started to fade”.

Royal Bank of Scotland poised for biggest loss in UK banking history

August 3, 2008August 3, 2008 by Infinite

Britain’s second largest bank expected to reveal it has lost £1 billion in first half

THE Royal Bank of Scotland is poised to unveil the biggest loss in UK banking history after taking a hit of almost £6 billion from the credit crisis.

Britain’s second-largest bank is this week expected to reveal a pre-tax loss of at least £1 billion for the first six months of the year, with analysts warning it could slide to as much as £1.7 billion in the red.

The loss would be roughly five times higher than the deficit racked up by Barclays in 1992 at the height of the last recession.

RBS chairman Sir Tom McKillop is already under pressure from investors after the bank’s recent £12 billion rights issue. His chief executive, Sir Fred Goodwin, who marks 10 years at the bank this weekend, also faces shareholder scrutiny.

US faces global funding crisis, warns Merrill Lynch

July 17, 2008July 16, 2008 by Infinite

Merrill Lynch has warned that the United States could face a foreign “financing crisis” within months as the full consequences of the Fannie Mae and Freddie Mac mortgage debacle spread through the world.

Draining away: The US may struggle to plug its capital gap

The country depends on Asian, Russian and Middle Eastern investors to fund much of its $700bn (£350bn) current account deficit, leaving it far more vulnerable to a collapse of confidence than Japan in the early 1990s after the Nikkei bubble burst. Britain and other Anglo-Saxon deficit states could face a similar retreat by foreign investors.

Banks face “new world order,” consolidation: report

October 22, 2008March 19, 2008 by Infinite

NEW YORK (Reuters) – Financial firms face a “new world order” after a weekend fire sale of Bear Stearns and the Federal Reserve’s first emergency weekend meeting since 1979, research firm CreditSights said in a report on Monday.

More industry consolidation and acquisitions may follow after JPMorgan Chase & Co on Sunday said it was buying Bear Stearns for $236 million, or $2 a share, a deep discount from the $30 price on Friday and record share price of about $172 last year.

“Last evening the Bear Stearns situation reached a crescendo, as JPMorgan agreed to acquire the wounded broker for a token amount of $2 per share,” CreditSights said. “The reality check is that there are many challenged major banks, brokers, thrifts, finance/mortgage companies, and only a handful of bona fide strong U.S. banks.”

Bear Stearns gets emergency funds

March 17, 2008March 14, 2008 by Infinite

Bear Stearns is one of the best-known US Wall Street firms

US bank Bear Stearns has got emergency funding, in a move that raises fears that one of Wall Street’s biggest names is on the verge of collapsing.

JP Morgan Chase will provide the money to Bear Stearns for 28 days with the Federal Reserve of New York’s backing.

World stocks tumble on US recession fears

March 21, 2008March 6, 2008 by Infinite

LONDON (AFP) – European equities dived on Monday after heavy falls earlier in Asia as markets were gripped by growing concern that the US economy was slipping into recession, dealers said.

Stock markets in Europe and the United States had sunk late last week following signs that the fallout from the US credit crisis was far from over.

In late morning European trade on Monday, Frankfurt, London and Paris stock markets chalked up fresh losses of about 1.5 percent.

Asian stocks plunged earlier Monday with Tokyo ending down almost 4.5 percent, Hong Kong tumbled 3.07 percent and Seoul gave up 2.3 percent. Singapore and Sydney both shed about 3.0 percent.

“Not a great start to the week with the UK following falls in the US Friday and Asia today,” said Mike Lenhoff, strategist at brokerage Brewin Dolphin.

“What matters most to investors is what is happening in the US. Investors view the US as in recession or going into recession which is not good news for corporate earnings and the market.”