It was a day for financial contemplation on Tuesday as the first anniversary of Lehman Brothers filing for Chapter 11 bankruptcy protection in the early hours of 15 September 2008 was marked, not quite by a minute’s silence but by many hours of contemplation of who the World’s financial systems almost went into meltdown.

Following the collapse of Lehman Brothers, once the fourth-largest US investment bank, the knock on effect caused meant that governments around the world had to pump trillions into their financial systems. The previously unimagined bank bail-outs, central bank actions and huge stimulus plans to save their biggest banks followed. Moves that are estimated to have cost every citizen of the developed world around $10,000 each..

On the day, Paul Myners, the minister who job it is to oversee London’s financial district, announced that he remains “very confident” that the UK’s multibillion-pound bailout of its troubled lenders will result in a profit for the country.

Last year the U.K. orchestrated a rescue package for banks including Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc. In the April annual budget the government submitted to Parliament it estimated that the bailout may cost taxpayers £50 billion

When asked to give his impressions when investments in the UK banking system would result in profit for members of the U.K. public, Myners replied by assessing that it will take “much less” time than a decade, and when it came it would add up to a “a nice little nest egg for the British taxpayer.”

Speaking of nest eggs or was it Easter eggs, Cadbury’s chief executive Todd Stitzer is due to be in the hot seat today, when he faces a group of the company’s’ top level investors since Kraft’s £10.2 billion unsolicited takeover proposal was rejected by the company. Stitzer as well as Andrew Bonfield, Cadbury’s chief financial officer are expected to be asked to outline the confectionery group’s long-term growth plans. The address was scheduled before Kraft approached Cadbury late last month.

UK oil and gas explorer, BG Group have announced another oil and gas discovery in a giant field off the coast of Brazil on Monday, making it the second in less than a week.

BG said further work was needed to evaluate the results before any concrete announcement can be made.

Hopes of a swift economic rebound and warned households and businesses of a “slow and protracted” recovery, according to Mervyn King, Bank of England governor.

King’s comments led to a sharp reassessment in financial markets of the likelihood and timing of any rise in interest rates.

The pound has taken a beating in the last few days, falling against all the major currencies for the last three months.

• Pound/US dollar 1.6477
• Pound/Euro 1.122
• Pound/Japanese Yen 148.8052
• Pound/Swiss Franc 1.7034

The FTSE 100 continued its upswing rising 60.31 points to finish on 5.102.44 while the FTSE 250 rose on Tuesday by 87.24 points to 9251.84/

The US recession is probably over but the economy will remain weak for some time due to unemployment, Federal Reserve chairman Ben Bernanke has said.

But he added that the economy would still feel "very weak" to Americans concerned about job security.

A year after Lehman Brothers collapsed, a think tank has warned the lessons of the crisis have not been learned.

The Institute for Public Policy Research (IPPR) says the rapid return to the City’s bonus culture shows that real reform has been "very limited".

The warnings echoed a speech by US President Barack Obama, who warned of complacency in the banking sector.

Despite President Obama’s and Bernanke’s comments , stocks on Wall Street rose on the day’s trading. The Dow Jones rose by 56.61 points to 9683.41, while the NASDAQ rose by 10.86 points to 2102.64.

Japan Airlines (JAL) plans to cut 6,800 jobs, as an airline trade body upped its projected losses for the global industry this year.

Media reports have said several US and European airlines are in the running to take a stake in the loss-making carrier.

The airline had already launched a programme of job cuts, plans for fuel-efficiency and a focus on business customers.

Reports this week have suggested that Delta Airlines and American Airlines are in talks to invest in JAL to expand into Asia via code-sharing agreements.

financial

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Tags: Andrew Bonfield, Bank of England, Banking, bankruptcy, Barack Obama, Ben Bernanke, BG Group, British Economy, British Pound, Budget, Cadbury, Credit Crunch, Currency, Dow Jones, Economy, Employment, Financial News, FTSE, Gordon Brown, Institute for Public Policy Research, Investment, IPPR, JAL, Japan Airlines, Kraft, Lehman Brothers, Lloyds, Mervyn King, Money, Money Markets, NASDAQ, Paul Myners, Recession, Retail, Royal Bank of Scotland, Stitzer, Stock Markets, Stocks and shares, UK Banks, UK Economy, UK government, UK Recession, US President

If the UK public needed any further proof that the recklessness driven by greed of the people that they trusted to run their banking system had driven their country to the verge of bankruptcy lies in the discoveries in a recent report that Great Britain, once the jewel in the crown of European commerce, now holds the highest percentage of toxic assets of financially distressed companies in all of western Europe.

In the days of the financial boom, and even before- hand , the British economy was substantially influenced by its financial sector, which made a tremendous contribution to growth in the United Kingdom. The British Chancellor of the Exchequer, Alistair Darling, was heard to say on more than one occasion that “London has risen to the challenge of the global economy and has become the world’s leading financial centre.”

In those halcyon days before the collapse of the financial system, London was indeed the Camelot of the European financial system , home to the highly influential London Stock Exchange, as well as the cream of the UK’s most important banks such as Barclays, Lloyds, the Royal Bank of Scotland Group and HSBC as well as several hundred international banks.

As the extent of the financial collapse began to hit home, it has come to light that the UK banks now currently hold just under a quarter of all the distressed assets in Europe. In terms of percentages, the UK banks were holding as security 24 percent of the assets all distressed companies in 2009, while Germany has 14 per cent, Italy 12 per cent and France just 6 per cent.

Those in the know were not surprised to discover the extent of the UK’s banks coverage, given the greater leverage that the British banks rushed to take on during the bubble years of private equity.

The European manufacturing sector has been the worst hit in recent years, with statistics showing that in July 2009, 41 per cent of distressed companies came from this sector manufacturing.

In the last few years, the UK accounted for 34 per cent of leveraged buyout (or LBO), or highly-leveraged transaction (HLT). This recipe for financial disaster for UK banks occurs when the assets of an acquired company are used as collateral for the borrowed capital, sometimes combined with the assets of the acquiring company.

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Tags: Alastair Darling, Alistair Darling, Bank, Bank of England, Banking, bankruptcy, Barclays, British Economy, British Pound, Credit Crunch, Currency, Debt, Economics, Economy, Finance, Financial News, Global Economy, HSBC, Lloyds, London Stock Exchange, Money, Money Management, Money Markets, Recession, Royal Bank of Scotland, Royal Bank of Scotland Group, Stock Markets, Stocks and shares, UK Banks, UK Recession

That air of cautious optimism that the UK can’t seem to shake off despite all that is going on around them seems to be continuing. Recent reports have a “significant increase” in interest from potential home buyers. This news comes coupled with the report that the number of people who have sold their property over the last month, despite being on the decrease, have indicated that asking prices are becoming much firmer, and the number of blatant bargain hunters are growing thin.

Just to show that some things never change is the report that four City investment banks have charged the Treasury a small fortune in consultation fees on how to survive the current financial turmoil, largely caused by the banks themselves. The UK Financial Investments (UKFI) paid out no less than £9 million on such fees as well as an £1.2 million of taxpayers’ hard earned money on salaries during the first five months that the body was in operation.

Leading British manufacturer and provider of IT solutions Viglen, owned by city businessman, Sir Alan Sugar, has been awarded a prestigious contract worth up to £30 million by the Office of Government Commerce (OGC) to supply a range of computer equipment to the public sector, beating of a string of overseas suppliers in the process.
The contract, to be carried out over the next 24 months, calls for Viglen to supply around 70,000 computer to over 45 central and local government councils, as well as NHS and local education authorities.

The contract was awarded after Viglen successfully completed a tender process, in the form of a unique and innovative reverse online auction, set up in accordance with EU directives by the Buying Solutions Company on behalf of the OGC. The aim of the auction was to achieve a clear picture of the needs of the OGC member bodies over the next two years, and to take advantage of the body’s considerable buying power to get the best possible deal. Officials of the parties involved in organizing the auction estimate that savings of £10 million will be generated by closing a centralised deal.

Mr. Andrew Hornby, who gained fame and a certain amount of notoriety in his former role as chief executive of banking grout HBOS, has been appointed chief executive of private-equity owned retail and drugs distribution Alliance Boots. Hornby will be leaving the world of seven figure salaries behind in his new job, with reports that his annual salary will be a mere £400,000, rising to about £800,000, should he be eligible to receive an annual profit related bonus. It ain’t no “goose that laid a golden egg” but at least it’s a job.
Things were quiet yesterday on the Stock Exchange. Shares in the Lloyd’s insurance underwriter, Chaucer rose by 6.4 per cent to close on 41½p on talk that Brit Insurance had secured financing for a 55p- a-share cash-and-stock offer. On the news, Brit insurance shares also rose by up 0.9 per cent to 191pence. Last month, Chaucer confirmed it was in talks with a number of bidders, among them Pamplona Capital Management, who reportedly would like to acquire a 28.9 percent stake in the company.
The FTSE 100 dropped 33.4 points to close on 4,405.56 while the FTSE 250 finished the day on 7,687.86

With the current political uncertainty surrounding Gordon Brown playing no little part, the pound’s revival drew to a minor halt yesterday.

Pound/US dollar 1.602
Pound/Euro 1.1544
Pound/Japanese Yen 157.4731
Pound/Swiss Franc 1.7539

In the United States, it was reported that the ten leading banks ordered by regulators to raise extra funds have begun to initiate sufficient plans that will enable them to strengthen their finances. According to the Federal Reserve who subjected the banks to these stress tests in May they are duty bound to ensure the programmes are implemented effectively. In addition, the US treasury department is also expected to announce in the coming days which of the US banks will be able to repay bail-out funds.
On the news the Dow Jones remained constant up only 1.36 points to 8764.49, while the NASDAQ dropped 7.02 points to close on 1842.4

Meanwhile, the US Supreme Court has granted a request by interested parties to delay the sale of carmaker Chrysler to a group led by Italian carmaker Fiat in order that they can pursue an appeal.

Chrysler entered bankruptcy protection in April following a massive slump in sales brought on by the financial crisis.
On the commodities stage, aluminum rose to its highest level for five months on Monday, despite the fact that recent data by the London Metals Exchange shows record stockpiles of the metal sitting in warehouses. Aluminium’s price has jumped 10 per cent in the past two weeks on expectations of a long overdue recovery in global demand.

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Tags: bankruptcy, British Economy, Credit Crunch, Economics, Finance, Financial News