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Rising unemployment may prompt new capital raisings

The worsening economic slowdown is increasing fears that Britain’s banks will have to raise still more capital next year in a market starved of investors.

Investment bankers are preparing for a second round of capital raising by UK lenders on top of the £65bn already declared. Having rebuilt their balance sheets after toxic debt writedowns, the banks face an increasingly dire economic outlook that threatens to take ordinary loan impairments from individuals and businesses to levels not seen since the early 1990s.

Under those worst-case conditions, impairment charges at the domestic banks - Barclays, Royal Bank of Scotland and the combined Lloyds Banking Group - could hit £60bn next year, according to Credit Suisse analysts.

“There could be a second credit crunch for banks, with a whole new round of writedowns late in 2009 as the economy filters back to banks,” a senior investment banker said. “They have so far only provisioned for the credit crunch - so they will need to undertake a whole new round of capital raising.”

A trading update earlier this year from HBOS, which will be bought by Lloyds next month, made grim reading for the sector. Impairments from commercial and residential property shot up, and the bank warned of more bad news to come as unemployment, the biggest driver of bad debts, continues to rise.

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Tags: Banks, Barclays, Credit Crisis, Credit Crunch, Economy, Lloyds TSB, RBS, U.K.

HBOS sent another wave of panic through the banking industry today after revealing that its bad debts will top £8bn this year, wiping out more than half the £15.5bn of emergency capital raised by the lender so far.

Shares across the sector tumbled, with HBOS crashing 20pc and Lloyds TSB 17pc as HBOS investors gathered in Birmingham and voted on its merger with Lloyds TSB. Preliminary indications show they voted overwhelmingly in favour.

Royal Bank of Scotland was off 17pc and Barclays 13pc by early afternoon, while analysts at Dresdner Kleinwort said “more capital increases [are] virtually inevitable” on top of the £50bn being injected into Britain’s eight largest banks.

HBOS revealed that bad debts on mortgages, credit cards and corporate lending - plus writedowns on “toxic” debts - had reached £8bn in the first 11 months of the year. The figure is a £3.2bn increase since September alone.

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Tags: Banks, Barclays, Debt, Economy, Financial Crisis, HBoS, Lloyds TSB, mortgage crisis, Mortgages, RBS, U.K.

ROYAL Bank of Scotland has secretly changed customers’ accounts into personal loans with up to 80% interest, generating debts of as much as £100,000, an investigation has revealed.

The bank, which was effectively nationalised 10 days ago, has admitted that its debt collection branch drew up new loan agreements and accounts for customers without their consent. MPs this weekend questioned whether the scheme was legal.

Duncan and Debbie Birch from Torrington, Devon, say their £24,100 overdraft ballooned into a debt of £100,000 when new loan accounts were created without their permission.

Documents show that at one point the couple were being charged an interest rate of 80%, although the bank claims this was rectified. Yet the couple say it has now obtained a legal charge of £70,000 on their home.

Another customer, Paul Walton, 41, from Rotherham, South Yorkshire, found loan documents drawn up in his name for new accounts. “They were fabricated and there was interest accumulating in the accounts,” he said.

The bank claims the new loan accounts were created “purely” for administration and that it was never intended that the debts should be collected.

They were unable to explain exactly what the purpose of the “administrative accounts” was, why they had created them and how many customers were affected.

John Healey, a former Treasury minister and Walton’s MP, said the situation was “deeply disturbing“.

“The system does not appear tight enough to prevent [these accounts] becoming the basis of real debt demands and court action,” he said.

December 7, 2008
Georgia Warren and Jon Ungoed-Thomas

Source: The Sunday Times

Tags: Banks, Crimes, Economy, RBS

Royal Bank of Scotland, Britain’s second biggest bank until the credit crunch struck last year, confirmed today that is now majority-owned by the taxpayer after a £20bn bail-out by the government.

The Edinburgh-based bank announced this morning that its existing investors had shunned its £15bn cash call, leaving almost all the new shares in the hands of the government. The taxpayer now owns 57.9% of the business. Only a handful of investors took up the offer to subscribe to new shares at 65.5p because the bank’s share price had been trading below that level, giving them no incentive to support the cash call.

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Tags: Banks, Economy, Financial Crisis, Government, Politics, RBS, Stock Market, Taxpayers

Companies targeted as nervous high-street lenders introduce crippling fees

High-street banks are continuing to hit businesses with punitive interest rates for loans and overdrafts and are resorting to more severe measures to ensure they are paid.

Some are demanding that owners of small businesses put up personal assets as collateral in return for a business loan. Others are changing conditions of loans by sending emails rather than meeting in person, and giving borrowers just 48 hours to comply with unilaterally-rearranged overdraft and lending agreements.

The Business Secretary, Lord Mandelson, said he was alarmed by the banks’ behaviour: “That is not the sort of constructive relationship that is sustainable between banks and businesses.

“I want a constructive relationship with them, of course, but they have to know they are going to be tested and judged by what role they play to help Britain and British business get through this economic storm.”

The Prime Minister, Gordon Brown, also heaped the pressure on misbehaving banks. “There is a loss of confidence in the banking system and they are increasing that loss of confidence by not acting the way banks usually do,” he wrote in a Sunday newspaper.

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Tags: Banks, Economy, Financial Crisis, RBS, U.K.

Last night an RBS spokesman said: ‘This was an entirely appropriate staff event to recognise outstanding performance by a small number of our staff.’
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The Royal Bank of Scotland has blown £300,000 on a secret champagne junket for executives - less than a month after being given a £20billion handout by the taxpayer.

Bankers and their partners enjoyed the lavish party to mark their ’success’ after a year in which the collapse of the banking industry led to global financial meltdown.

The supposedly stricken bank laid on the celebration amid extraordinary secrecy to try to prevent details reaching the public, even cancelling the original venue, a top hotel in Hampshire, and transferring the party 350 miles north to Edinburgh.

Dancing in the street: Bankers threw a lavish party to celebrate ’success’

But despite holding the black-tie ball in private, executives gave the game away as they danced in the street and continued the fun back at their five-star hotel.

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