‘Good times round the corner for UK property market’

August 26, 2009 at 1:51 pm

The end of June brought some much-needed good news for the UK property market and increased speculation that we may be coming out the other side of the worst of the current global economic slump. The Bank of England released statistics showing that banks in Britain had lent 47,584 mortgages in June. This represented a substantial rise of 3,415 (44,169) on the month before, exceeding economists’ expectations. The figure is the highest in 14 months and signals a rise in confidence in both the lenders, and those lending.

Whilst economists are naturally remaining wary and continue to advise caution regarding over-optimism, there is definitely an expectation and sense of hope within the banking world that things are finally starting to improve.

House prices held their value for the third straight month in July offering a level of economic stability which many will find encouraging. George Buckley at Deutsche Bank AG felt confident enough to say, “we’re expecting to see mortgage approvals rise as the banking crisis begins to ameliorate”.

The news followed figures released earlier in July by the Land Registry, which showed that house prices rose between May and June for the first time in 18 months. The total value of mortgages lent in June was £12.3 billion (up 17% on May), which represents a six-month high.

“It is mortgage approvals that are seen as the key forward looking indicator for housing market activity. The Bank of England data indicates that the ongoing gradual upward trend in housing market activity remains intact,” offered Howard Archer at IHS Insight.

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‘Lloyds could ditch final salary pension scheme’

August 21, 2009 at 3:40 pm

There’s more bad news for employees in the banking sector as Lloyds has become the latest bank to consider scrapping its final salary pension scheme. This comes just days after staff at Barclays threatened to take strike action surrounding the bank’s decision to discontinue its final salary pension scheme.

There’s no doubt that the banking sector is in crisis, and it looks like the employees are going to suffer the most. Lloyds recently confirmed that it has already started to standardise the terms and conditions of its employees as it begins the integration process with HBOS.

The DB (defined benefit) scheme, as it is known, had already been closed to new members way back in 2003. But the bank has now gone a step further by looking into reviewing the final salary pension scheme of its current employees.

And it’s not just the banking sector that is considering such a move: oil giant BP has also said that it will be closing down its own scheme in the near future.

A spokesperson for Lloyds said that they were “reviewing our total reward package across the group”, and they confirmed that this would include pensions. However, no firm decisions have yet been taken, even though it looks likely to go ahead with the action. For this reason they have not yet begun consultations with unions.

The LTU, which is the largest union operating at Lloyds, has expressed its concern at the bank’s likely decision. After hiring actuaries to try to determine how much the staff are likely to lose in benefits they came up with a figure of £4 billion.

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‘HSBC receives fraud risk fine’

August 21, 2009 at 3:39 pm

As if banks were not having a hard enough time at the moment, HSBC has just been hit with a massive £3.2 million fine by the FSA (Financial Services Authority). It was found to have put its customers at risk of identity theft and potential fraud through a series of errors and it is now paying the price.

The fines were a consequence of mistakes made by different sectors of the bank: HSBC Insurance, HSBC Life UK and HSBC Actuaries & Consultants. The total fine was spread over these three for separate incidents.

The first incident involved HSBC Actuaries & Consultants, which lost a floppy disc in the post in 2007 that contained details of 1,917 members of its pension schemes. In February 2008, HSBC Life then lost an unencrypted CD which contained details of 180,000 policy holders. There were also incidents of sensitive files being left in the open and not locked away.

Margaret Cole, the FSA enforcement director, said that all of the three sectors “failed their customers” and that this could have led to personal details ending up “in the hands of criminals”. She also expressed her concern that despite the increased awareness of how important it is to keep personal information safe, this did not lead HSBC to do more to take care of the details.

Despite the size of the fine, it could have been even bigger. Because HSBC cooperated with the FSA, it was granted a 30% discount; if this had not happened it would have had to pay the maximum fine of £4.55 million.

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£3bn profit for Barclays, but debts still high

August 17, 2009 at 2:53 pm

Barclays has posted a profit of almost £3bn for the first six months of 2009. The bank’s investment banking division – Barclay’s Capital, or BarCap – saw profits double, and rounded off June £1.05bn in the black. Robert Peston, the BBC’s golden boy, hailed the return of investment banking.

Despite an overall increase in “bad debts” owned by the company, Barclay’s shares jumped 2.44% to 336.50p overnight. Bob Diamond, the current president of Barclays, applauded the news.

But the figures are misleading. Barclays’s debts have doubled since mid-2008. The bank’s retail division, providing support for over fifteen million people in the UK, suffered a shattering 61% loss, totalling some £390m. Rival banks Lloyds and Northern Rock also posted humiliating losses.

Industry experts are suspicious. Barclays’s first-half results have led some to believe that the bank has begun ‘gambling’ on toxic assets – a practise that precipitated the credit crunch.

A wage-hike for BarCap employees has also rekindled the furore surrounding staff bonuses. Jon Varley, the chief executive of Barclays, refused to comment on employee business until the end of 2009, stating that they don’t make bonus payments "at this point of the year", and that when they do they will "take guidance" from the Financial Services Authority.

Barclays was one of the few banks to avoid nationalisation during the credit crunch. The recent figures may suggest that the fabled “green shoots” of recovery are finally beginning to poke through the ash.

Lloyds and the Royal Bank of Scotland are expected to release first-year results before the end of the week. Barclays’s interim report is available on the official website.

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‘Graduates should shop around’

August 17, 2009 at 2:28 pm

Many students have recently graduated and most are now either frantically job hunting, or else having decided that the job market is so dire at the moment, they are planning a spell abroad. What most of them are not doing is researching which graduate bank account they should opt for, which, given the huge student debt which many have amassed whilst studying, is the very thing that they should be thinking carefully about.

Too many students stick, either through laziness or loyalty, with the bank they have used as an undergraduate. Instead they should be looking at all their options and not just staying put or opting for the bank that offers the best freebies.

The amount of interest-free overdraft offered to graduates varies from bank to bank and some will carry a charge so it is well worth checking all the options and doing some sums. For instance, banks such as the Abbey, NatWest, Lloyds and RBS offer a £2000 interest-free overdraft in the first year after graduating but Barclays offer £3000 for a monthly charge of £7. Depending on whether you think you will need the extra £1000 the Barclays account could make financial sense. If you were to run up that extra £1000 overdraft with one of the other banks it would set you back around £1800 for a year.

It is also important to check the rates for authorised borrowing, should you need more than your interest-free overdraft and also the unauthorised borrowing rate just in case you end up in the red by mistake.

Finally though, Andrew Hagger of advises new graduates not to fret about their student loan too much since it is one of the cheaper forms of borrowing; in fact if you have run up a credit card debt it makes good sense to pay that off first.

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‘Credit card controls could be introduced’

August 7, 2009 at 4:24 pm

One thing the recession has done is to highlight the increasing problem of credit card debt, as well as other types of consumer debt, including overdrafts. Now the problem is so great that the government wants to take action to reduce the amount of debt that we as a nation are in. One of the measures to do this involves preventing bad industry practices from continuing.

Top of the list in this department are credit card cheques. These cheques come through the post unsolicited, and have led many people to get into debt without really realising it. They are simply blank cheques that provide another method of spending, and they’re worse than using credit cards because they don’t provide any interest-free period and come with handling charges. All this means that many people don’t realise that they represent a more expensive way to spend.

Now they could be banned as the government has revealed a white paper that highlights ways in which consumers should be protected from incurring further debt. As well as this, another area where changes could be afoot is in the raising of borrowing limits on credit cards. Many people do not ask for their limits to be raised, and this can encourage people to get further into debt. Uswitch research suggests that 20% of the country got an increase over the past year without asking for it.

There are also other wide ranging plans included in the white paper to help people control their debt. These involve increasing the minimum payments on credit cards that are designed to keep people in debt. If it can help to lower the £54.4 billion that we currently owe on credit card debts then it will be a step in the right direction.

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‘Bank of England decide not to inject more cash into country’

August 7, 2009 at 4:23 pm

Many in the City were left disappointed last week as the Bank of England decided not to inject more cash into the economy in its quantitative easing programme. Although it was widely expected to add £25 billion to the current £125 billion already printed, the Monetary Policy Committee voted against increasing the amount of money being printed. Interest rates were also left unchanged.

The quantitative easing (QE) programme has been in place since March, when it was decided that the Bank would buy off government debt by printing new money. This is a common technique used by economies during times of recession. The Chancellor decided that the maximum amount to be authorised would be £150 billion, and it was widely expected that the remaining £25 billion would be injected into the scheme. But in the end it was left unchanged.

The Bank has now announced that it will “review the scale of the programme again" in August. But, for some, the fact that it has not been renewed this time around means that the QE scheme will be closed down. Some have voiced their concern about the move. Speaking in The Telegraph, Dominic Bryant of BNP Paribas said that the move “disappointed expectations” and has “increased uncertainty” surrounding the commitment of the Bank to QE.

Some have gone even further, with the BCC (British Chambers of Commerce) calling for the level of QE to be raised to £200 billion in the near future. The decision also led to a sharp fall in government bond prices after it was announced.

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