RBS may still have a few more surprises up their sleeve- most of them unpleasant.

June 18th, 2009 by admin | Filed under Daily News, Employment, Money Management, Recession, Saving, The Budget, UK Bank Accounts, UK Banks.

banking As the Royal Bank of Scotland’ struggles to push itself out of the quagmire created by Sir Fred and his crew, unpleasant surprises continue to emerge. A recent statement by incumbent CEO Stephen Hester made at the recent British Property Federation conference. The bank’s losses on real estate loans could be higher than it has provisioned for.
Hester went on to add that the bank’s updated assessment is that it could take between three and five years for the excessive level of property lending to level out. Summing up on a more positive note, Mr. Hester said that he foresaw for the future that RBS would need to reduce its exposure to the sector significantly, but that it would “behave responsibly and play a long game”, helped by the fact that most borrowers were continuing to service the interest on their debts.

Meanwhile UK chancellor Alistair Darling issued a warning to the British Bankers’ Association that further regulation and a crackdown on sloppy boardroom practices are on their way, including new regulations on higher liquidity and capital standards at banks. His announcement comes ahead of the release of a Treasury white paper next week on financial regulation, and the forthcoming EU summit in Brussels on plans for regional regulation of the banks.

That perennial bearer of bad news, the Office for National Statistics announced that UK unemployment has passed the two and a quarter million mark, in the three months to April 2009, making for the highest UK unemployment levels since November 1996. However there was a minor crumb of comfort to be taken from the news that the number of people claiming unemployment benefit rose by only 39,000, less than the 60,000 forecast by analysts.

Bus and rail operator National Express have announced the successful renegotiation of terms against their outstanding £1.2 billion, allaying fears that the company were liable to breach payment conditions set on the existing loan.

National Express have been fighting an uphill battle coping with servicing such a massive debt burden, whilst struggling with a major slump in passenger revenues, especially on its East Coast train franchise. At the same time, payments to the Department for Transport to service the franchise have been on constant increase.

And if things are bad on the ground, then they seem to be a lot worse in the air. If you need confirmation ask Willie Walsh, British Airways chief executive, who is facing fresh conflict with the unions on his proposal that BA staff should follow his personal example and work without pay for a month.

Walsh sent a personal note to each of the company’s 40,000 employees, asking them to volunteer for up to four weeks of unpaid work or unpaid holiday leave. Either option means no salary.

Needless to say it looks like Walsh faces a tough task convincing staff to accept his proposal, being that there is already no love lost between the company and the unions. Both Willie Walsh and BA’s chief financial officer Keith Williams set a precedent by announcing that they will be waiving their salaries for July. However a spokesman for Unite, BA’s biggest union, remained unmoved and unimpressed by observing that: “Willie Walsh can afford to work a month for free. Our members can’t

On the stock market, Sainsbury’s shares dropped 5.65 per cent to 313 pence after a surprise announcement that they plan to raise £445 million of fresh capital through a stock issue estimated to be worth £255 million as well as £190 million of convertible bonds offer. The capital is earmarked to fund the company’s growth; a spokesman for Sainsbury’s pointed out.

On the announcement that they had acquired a majority stake in an Indonesian clove cigarette maker shares in British American Tobacco (BAT) rose 0.2 per cent to 1660 pence. The acquisition that will cost BAT around £300 million will elevate the company to be the world’s fifth-biggest tobacco company, increasing their global market share from 2 per cent to 9 per cent.

The recent publication of the Digital Britain white paper has already worked wonders for the BT Group as hopes that government plans to extend broadband internet access would greatly benefit the fixed-line operator. After an advance of 8 per cent on Tuesday, shares in BT in rose a further 3 per cent to 106 pence.

Yesterday was not such a great day for FTSE. The 100 continued on its course of fluctuation this week falling 50.11 points to finish on 4,278.46. The FTSE 250 continued its rapid downward descent this time losing 174.45 points to close on 7,309.05.

Sterling rose for the second day again ever so slightly against the dollar, while losing considerable ground against the other major currencies

Pound/US dollar 1.6427
Pound/Euro 1.1766
Pound/Japanese Yen 157.0514
Pound/Swiss Franc 1.7711

The US government has announced a major reform of banking regulation to prevent future financial crises. The overhaul will require big banks to set more money aside against future losses to curb excessive risk taking. Consumers will enjoy the protection through a new government agency formed to protect their interests as well as regulating credit on mortgages and credit cards.

The US equities market moved into fluctuation mode on Wednesday as the government released details of their proposed regulations.
The Dow Jones rose 42.77 points to close on 8547.44, while the NASDAQ climbed back over the 1800 barrier, up 23.99 points to 1820.17.

US consumer prices rose less than had been expected in May, as the recession continued to keep inflation down.