Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

UK Mortgage and Commercial Banks Decimated by Bear Stearns Bust

Companies / Banking Stocks Mar 17, 2008 - 03:24 PM GMT

By: Nadeem_Walayat

Companies Best Financial Markets Analysis ArticlePanic selling of the financial sector gripped the stock market today following news of the bailout of Bear Stearns over the weekend. The FTSE ended the day down over 200 points. The banks hit the hardest were the mortgage banks followed closely by those with large mortgage backed bonds and derivatives exposure as the deleveraging of the $500 trillion market continues. The Bank of England stepped in to provide emergency lending of £5 billion which was oversubscribed by more than 5 times, and indication of the desperate state of the UK banks.


Royal Bank of Scotland (RBS)

RBS Fell nearly 9% to 304p, the bank is down 58% from its 12 month high of £7.20. The resulting yield of 15% seems unsustainable in the wake of further write downs expected.

The bank is still in the process of digesting its takeover of ABN Amro, which unfortunately brought several £ billions of losses in sub prime mortgages with it that has hit the RBS share price.

 

Charts courtesy of bigcharts.com

HSBC

HSBC is one of Britain's strongest banks, that despite large losses of more than $20 billions in the US sub prime housing market, managed to increase profits by 10% to $24 billion due to surging revenues from its extensive asian operations.

This underlying strength is reflected than the fact that the bank's share price has managed to hold up well compared to many others, falling just 2% on the day to £7.46, and down 24% on its 12 month high of £9.72. The bank is expected to continue to outperform the banking sector despite expectations of further bad debt losses of another $20 billion.

 

Barclays

Barclays, in the light of its failure to take over ABN Amro was seen as a positive outcome in the light of the credit crisis and infact as a potential take over target itself. However, given the current high risk environment, take over talk has completely evaporated which is reflected in the fall of its share price today of nearly 10% to £3.92 and a fall of 50% from its 12 month high.

Barclays has estimated losses of $3 billion in its sub prime and derivatives related activity. This is expected to grow over the next 12 months by at least a further $2 billions.

 

Halifax Bank of Scotland (HBOS)

Britain's biggest mortgage bank crashed by 12.5% today to just £4.60 per share, that's a fall of 60% over the last 12months.

As the UK housing market tumbles the Halifax despite its size is going to come under increasing financial pressure. However, it 'should' survive and come out stronger at the other end of the crisis, perhaps in 2010.

 

 

Alliance and Leicester

A&L, a buy to let market specialist saw its share price plunge by over 7% to £4.75. The banks share price has fallen over 61% in 12 months. The bank has over the last 6 months attempted to move some way away from the buy to let market and has expanded its commercial banking operations which is expected to give some support to the bank going forward. However unlike many other UK mortgage banks the A&L does have sizeable direct exposure to the US sub prime mortgage market and therefore is at serious risk of seeking emergency funding from the Bank of England.

 

Bradford and Bingley

B&B ended the day at £1.93 down 3.6%. The bank is down 65% from its high of £5.40 and the earlier fall below £2.40 had seen the bank break below critical multi year support levels, a level that now is expected to act as a cap on the share price.

This bank most closely resembles Northern Rock in that of heavy reliance on the money markets and high degree of exposure to the UK's speculative buy to let mortgage market. Infact, Bradford and Bingley is Britain's biggest buy to let mortgage bank. Therefore the bank is at serious risk and expected to experience extremely difficult trading during the UK housing bear market that is just beginning.

The major UK Banks at most risk of failure are those with large mortgage books such as HBOS, A&L and Bradford and Bingley. The banks most likely to whether the downturn the best are those with far east exposure such as HSBC.

What's not mentioned are the smaller banks and a whole host of financial institutions that are heavily involved in the UK sub prime and buy to let mortgage markets that are near tipping points.

The impact on borrowers is being felt in the widening spread between the base interest rate and the mortgage rates offered to customers coupled with increased arrangement costs and much tighter lending criteria. This was first highlighted some 7 months ago UK Housing Market Crash of 2007 - 2008 and Steps to Protect Your Wealth . The Banks of began withdrawing easy credit facilities during September 2007,(UK Mortgage Banks Call in the Loans - Housing Market Deflation) and even today more mortgage products vanished from the banks shelves in a deluge of press releases giving mere minutes of withdrawal notices.

The UK housing market is now down some 5% from the peak set in August 07, and is on course to meet the forecast target for a minimum 15% decline over 2 years. The consequences of this is for further strain on the market banks with no light at the end of the tunnel in sight. The risks are obvious that Northern Rock, and Bear Stearns will be followed by more bank failures and subsequent central bank bailouts which contributes towards a stagflationary environment.

The British Pound fell sharply on the increased risks of bank failures as the UK's financial sector is much larger as a percentage of the economy than virtually all other major industrialised countries, therefore the economic impact going forward will be much greater than consensus expectations.

By Nadeem Walayat

Copyright © 2005-08 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading, analysing and forecasting the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 120 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Attention Editors and Publishers! - You have permission to republish THIS article if published in its entirety, including attribution to the author and links back to the http://www.marketoracle.co.uk . Please send an email to republish@marketoracle.co.uk, to include a link to the published article.

Nadeem Walayat Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules