Signs are beginning across the Atlantic that consumers are beginning resurrect the practice of borrowing their way out of trouble. A recent surge in consumer debt defaults in the US could well spread to the UK, according to a recent report issued by the International Monetary Fund (IMF).

The IMF have forecasted that of the almost £1.5 billion of credit card debt currently held in the UK, around seven percent of that, or around £100 million may need to be written off. Confirmation of the sad facts is expected to be released next week when UK banks begin reporting their first-half results. Some of them have already warned that a sharp increase in credit card debts will need to be taken into account.

House prices in the U.K. continue to solidify, expected to hold their value for a third consecutive month in July. While the credit squeeze and the recession continues to prevent the property market from improving the average cost of a home in England and Wales was stable at £155,600 pounds, which was still almost eight percent lower than in July 2008.

The National Express takeover saga continues. The company announced that they are liable reject the Cosmen family takeover bid, which only values the group at around £500 million.

It is expected when National Express present their interim results towards the end of the week, they will explain to their shareholders that their desire to remain independent, and become profitable through cutting costs and reducing their debt burdens. Steps that should make the company far more attractive for takeover in the future. ,

Two potential suitors for National Express have been turned away as they have offered around 325 pence per share, while National Express are looking for 400 pence, giving the company a value of around £620 million.

The Cosmen family are National Express’s largest single shareholder, with an 18.5 per cent holding, and Jorge Cosmen is its deputy chairman. Shares in the company have risen since Friday when the Cosmen family in partnership with CVC confirmed their interest.

It was carnival time on the FTSE as the market equaled its record of eleven consecutive positive session

Among the best performers was Lloyds Banking Group who added 6.9 per cent to close on 88.33 pence. Analysts expect shares in Lloyds to reach as high as 100 pence in anticipation of the bank’s half year results to be announced on Wednesday.

The FTSE 100 index closed up by only 9.52 points to 4586.13, taking e index’s gains over the past 11 sessions to 10.6 per cent which is a new record, beating the 7.1 per cent in 1997.

Meanwhile the FTSE 250 recorded its first reverse for a while down 61.58 points to 7,876.86

The pound gained a little ground on Monday against the leading currencies.

Pound/US dollar 1.6464

Pound/Euro 1.1573

Pound/Japanese Yen 156.5371

Pound/Swiss Franc 1.7634

Chairman of the US central bank Ben Bernanke rushed to defend the US bail-out plan of which he was among the principal architects. Bernanke admitted that his fears that the UK were heading into a second Great Depression had helped him to decide to back the stimulus plan which has so far cost the US taxpayer around $700 billion. Bernanke went on to point out that the bailout had widely benefitted the US economy and that no one should be surprised if further capital might be required to prop up the system.

Seemingly unfazed, the Dow Jones continued its steady rise, up by 15.27 points to 9108.51. The NASDAQ made a small gain, up a mere 1.93 points to close on 1967.89.

Recent reports have revealed that the annual rate of new home sales in the United States has risen by more than ten percent in June, further signs that the property sector is over the worst.

The US Department of Commerce announced that sales of new properties have hit a seasonally-adjusted annual rate of 384,000 in June, against 346,000 in May.

Whilst June’s figures were the strongest seen since November 2008, the average sale was down 5.8% from May and 12% lower than a year ago at $206,200 (£125,000),

On Monday Commodities made a strong start to trading, continuing last week’s gains. Prices of European crude rose beyond the $70-a-barrel mark while base metals staged a broad advance, led by copper that

jumped to its highest level in almost 10 months in the London, New York and Shanghai markets. The commodities are always an excellent barometer to gauge the extent of the global economic recovery.

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Tags: Bank, Bank of England, Banking, Ben Bernanke, British Economy, British Pound, Cosmen, Credit Card, credit card debt, Credit Crunch, Currency, Debt, Dow Jones, Economics, Economy, Financial News, FTSE, House Prices, IMF, International Monetary Fund, Lloyds Banking Group, Money, Money Management, Money Markets, Mortgage, Mortgages, NASDAQ, National Express, property market, Recession, UK Recession

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

Thursday saw the launch of a long awaited white paper on consumer affairs that would prevent the practice of banks increasing customers’ credit card limits without their permission, as well as completing disallowing the them from sending out unsolicited ‘credit-card cheques’ . According to almost ten percent of the UK population had their credit card limits increased last year without them asking, meaning that to date less than three per cent of the UK’s 30 million card holders have had their borrowing power reduced since the credit crunch began. Banks continue to defend their in your face credit marketing tactics, insisting that full credit checks are made.

Bowing to increasing investor pressure, Royal Bank of Scotland chief executive Stephen Hester has announced his intention to defer part of his controversial 9.6 million pound pay package for an extra two years. Hester has been the subject of criticism for accepting such a large overall package before achieving real results at the loss-making bank,

Disproving the theory that lawyers make money no matter what, was the news that the World’s largest law firm are reporting a very significant dip in profits and the need to make significant cutbacks. The practice, Clifford Chance boasts a client base that includes some of the financial institutions hardest hit by the downturn, from Royal Bank of Scotland to Citigroup.

The prospect of a bidding war for T-Mobile UK was hotting up on Thursday, on the news that Telefonica are also taking a close look at the mobile phone service operator. Spain based Telefonica has been spurred into action by the possibility that Vodafone purchases T-Mobile UK. France Telecom is also reportedly in the running, through forming a joint venture between its UK mobile business Orange and T-Mobile UK.

Marks & Spencer executive chairman Sir Stuart Rose has hinted strongly of his intentions to step down as chief executive in 2010, with his likely replacement looking like being director of food at the company, John Dixon. Rose has insisted that he would only relinquish the chief executive’s role if a successor was found, and after he hands on the keys, will stay on for a period as chairman.
The search for a new executive chairman at M&S could officially begin as early as September.

London equities fell on Thursday as the improving economic outlook failed a stern test in the form of closely-watched US jobs data.
The FTSE 100’s losses accelerated due to a sluggish start to trade across the Atlantic. London’s benchmark index fell 106 points, to 4,234.27. The FTSE 250 closed on 7,374.01 down 132.70

Sterling had another bad day against the leading currencies, falling on all four fronts.
Pound/US dollar 1.6418
Pound/Euro 1.706
Pound/Japanese Yen 157.2965
Pound/Swiss Franc 1.7772

The number of jobs lost in the US last month which was much more than had been expected, coming in at 467,000, as the grass roots of the US economy continued to struggle.

The jobless rate was 9.5% in June, up from 9.4% in May and
The highest since August 1983.

On Wall Street, the Dow Jones took a major tumble on the announcement of the unemployment figures, closing the day down 180.09 points to 8323.97, while the NASDAQ lost 33.02 points to close on 1802.76.

Confirming that the world’s third-largest economy is continuing to expand, China’s manufacturing and business activity for June finished in positive mode.
Another emerging superpower, India has announced a slight step up production, since a sharp downturn began in late 2008.
Meanwhile Japan and Australia are both displaying tentative signs that the worst of the economic downturn may soon be behind them.
Oil fell on Thursday as the market continued to digest US government data showing a large increase in gasoline stocks, increasing crude oil producer’s worries that consumer demand was flagging and the energy markets had been overbought.

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Tags: Bank, Banking, Credit, Credit Crunch, Debt, Financial News, Royal Bank of Scotland, Stephen Hester, UK Banks, UK Credit Cards

UK Chancellor, Alistair Darling expects to receive the go ahead that they UK will be recipients of some much needed financial aid within the coming weeks from the European Commission. However with the aid will come some conditions, particularly that they the commission expects to seek the shrinking of assets in the partially state owned Lloyds Banking Group.

Officials from the UK Treasury strongly suspect that the Brussels based commission could stipulate a reduction in asset holdings or agree to an even more unacceptable situation where the EEC will have a say on the running of the bank in the future.

Lloyds management team have admitted that these are real possibilities and have even stated them in writing in a tender issued on Wednesday as part of its £4billion request offer.

Talks between officials at the UK Treasury Department and European Commission officials in Brussels have been taking place for the last few weeks, and appear to be drawing close to the point where serious decisions have to be made.

Lloyds’ warning underscores the new and uncertain situation that state owned banks will have to face for the foreseeable future, with not only Lloyds but also the Royal Bank of Scotland having to come to terms with being part of a completely different picture.

Under European Union rules, companies (even banks) that have been the recipients of government aid are required to restructure their balance sheets and their assets, toxic or otherwise, to offset any competitive edges or advantages stemming from the assistance that they have received.

UK Chancellor, Alistair Darling and Prime Minister Gordon Brown have consistently borrowed to pay for rescuing banks that have reported around eighty billion pounds in losses and asset write-downs since 2007.
Till now, the government pledged has pledged around forty billion pounds in order to re-finance banks whilst guaranteeing hundreds of billions of pounds worth of loans, some of which are “highly toxic”

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Tags: Alastair Darling, Debt, EEC, Financial News, Lloyds Banking Group, UK treasury

For at least the next twelve months, more than six million UK families will be living in a state of fear and financial uncertainty. According to recent research, homeowners, many of them already ridiculously exposed due to paying well above the true market price in an effort to get on the property ladder now face the real risk that unemployment or illness will cause them to fall behind on their mortgage payments and they will face eviction. And it won’t take much for them to find themselves in such a position
Statistics now show that more than sixty percent of the working population are living on a day to day basis with this fear, and are increasingly fretful, largely due to increasing silence from both the banks and the government on policy regarding repossessions. Many of the public feel that the government has paid too much attention on bailing out the banks and insurance companies, and not on providing some form of “safety net” for home owners.

While the feeling is that the credit crisis has bottomed out and the only way from here is up, for much financial security is still a long way away. In the meantime, with more than 40% of mortgage payments dependant on joint incomes, there are many families juggling their incomes on a very fine balance.

And their fears are not without foundation, with the Council of Mortgage Lenders currently estimating that more than 75,000 UK homes will bill repossessed in 2009, adding more than 300,000 people to the list of homeless.

Understandably this fear can cause tremendous repercussions within the family, and many consumer societies are simply requesting some form of official statement clearly laying out the criteria under which a family will be evicted from their home and what steps can be taken to prevent this from happening.

This scenario is too real for too many people, with information from the
Financial Services Authority (FSA) showing that the number of mortgages in arrears rose by 31 per cent in 2008 and that two and half million mortgages holders will see their property fall into negative equity in 2009.

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Tags: Budget, Debt, Economics, Economy, Money Management, Mortgage, Mortgages, Recession

When the implications of the current financial crisis began to dawn on an unprepared word, financial analysts were throwing around phrases like ” it will take two trillion dollars to get the World out of this mess” For the man in the street this was hard to digest, mainly because very few people can encompass how much money a trillion dollars is, let along two of them. For those of you that haven’t already found out, a trillion dollars is one thousand billion dollars or 683 billion pounds if that makes you feel better. And that is the sum of money that members of G20 agreed to throw into the global kitty, and by doing so will be signalling the beginning of the end of the world recession.

What makes this second trillion more significant than the first is that it will be handled largely by the International Monetary Fund (IMF) and not by World banks and business conglomerates. With this move IMF will see their cash reserves more than tripled.

A further $100bn has been earmarked to open up new credit lines aimed in to encourage countries to increase international trading and prevent protectionism, and $250bn for finance domestic trade in across the globe.

UK Prime Minister Gordon Brown, who hosted the conference, found it hard to suppress his enthusiasm of the outcome. He announced. “This is the day that the world came together, to fight back against the global recession”

As well as discussing the level and the manner of funding, G20 leaders also touched upon a few other spicy subjects including tax havens, increased regulation of the financial system regarding large hedge funds, performance based bonuses and hefty salaries in the financial services sector and a much stricter overseeing of agencies that provide credit ratings.

The rift between the Us and European camps did not transpire although French President Nicolas Sarkozy and Angela Merkel, the German chancellor did take their expected stance against more money being pumped into economies to stimulate a return to growth

Despite the fact that it appears that fresh fiscal stimulus will not be forthcoming , the consensus among the delegates was that the fiscal expansion that the trillion plus dollars will generate recovery and growth equivalent to $5,000 billion worldwide, equal to four per cent boost of World Production.

As the meeting wound down, the G20 issuing a statement which stated that the actions will constitute the largest fiscal and monetary stimulus and the most comprehensive support programme for the financial sector in modern times. And hopefully the last.

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Tags: Banking, British Economy, Debt, Economics, Financial News, G20, Gordon Brown, Recession, UK Recession

At one time, before the credit crunch implosion was ever thought of, credit cards seemed liked a really good idea. And the truth is, it still is. If placed in the proper hands.

However, in the days of easy credit, things got very out of hand. Credit card companies, on the constant look out for more paper profit, began to offer unreasonable levels of credit to the UK public, too many of whom took up the temptation to live now and pay later, without taking into account the long term implications. And the implications for too many people, especially young families starting out in life, is that they will be facing a future filled with uncertainty and debt.

However this situation appears to be drawing to a close thanks to proposed UK government legislation that will see an end to credit card company’ practices of raising a customer’s spending limits on their credit card without them requesting it. Another recent marketing tool that the credit card companies have adopted recently is to send cheques by post to their customers, These cheques, always unsolicited, present tremendous temptation to people who are struggling to make ends meet to “borrow their way out of trouble” Instead, they are only placing themselves in deeper financial trouble in the long term.

APACS, the UK trade association that provides a forum for financial institutions to discuss issues relating to the payments industry hastened to announce that its members did not raise the credit limits of borrowers with known financial problems. Currently it is estimated that credit card debt in the UK stands at a staggering £53 billion.

Consumer Affairs Minister Gareth Thomas has expressed his concerns, both on the amount of credit card debt in the UK. With the average adult carrying a debt of close to £2,000 in addition to their other financial commitments.

” We are concerned that people may be tempted to borrow irresponsibly if credit card companies increase borrowing limits without this being requested by customers, or send out unsolicited credit card cheques,” said the Minister “It’s vital we protect consumers at this time and we are exploring these issues carefully,” he continued.

A new code of practice for the credit card industry, instituted back in the 2006, imposed on credit companies to carefully assess a customer’s suitability before sending out cheques or raising limits without solicitation on behalf of the customer. They were also requested to explain clearly the implications and costs of taking up these offers. However, in practice, most people see these offers as a lifeline and find it difficult, if not impossible, to refuse.

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Tags: Banking, British Economy, Credit, Credit Crunch, Debt, Financial News, UK Credit Cards

Whilst the management team at Barclays Plc continue to vehemently deny reports that they are very interested in offloading their fund management division, San Francisco-based iShares, the signs are that a deal is in the offing. The anxiety on the part of Barclays to rush the deal through is apparently due to last ditch efforts to raise capital to avoid needing to participate in the UK’s government’s toxic loan insurance scheme.

Rumour has it that Barclays have begun talks with financial institutions as well as private equity investors in the United States who may be interested in buying iShares, who operate in exchange-traded funding.

Turnover in their iShares division accounts for around twenty five percent of the total of $1 trillion in fund management business handled by Barclays Global Investments. Despite the downturn, investors continue to place a lot of their faith in these funds, which handle corporate U.S. stocks bonds, commodities and real estate. Barclays turned over more than$56 billion in new assets during 2008.

Any sale of its iShares business could be conservatively estimated to rise up to 5 billion pounds for the bank, allowing them to take a considerable step forward in blocking the government’s intention to take a share in the bank.

Analysts have been expecting Barclays to attempt to raise capital through the by selling of off assets to shore up their capital base to maintain commercial independence. It is reckoned that the bank is capable of absorbing up to £17 billion in future losses before it would need to raise new capital.

Speculation has it that Barclays’s are singularly disinterested in participating in the UK Treasury’s asset protection scheme (APS), as it will severely dilute their share value. APS, designed to limit the losses banks are liable to face on taking on corporate loans and mortgages, which have in the recent past has been very bad for the banks. The government’s aim in establishing the APS scheme was to allow the banks to circulate more money in the economy, by removing the risks that they could incur if debts turn sour.

Till now, Barclays have resisted the challenge to come under government control, largely due to the backing of foreign investors, situated in the Middle and Far East. Sale of iShares is likely to continue to bolster Barclay’s fight for independence by freeing up some much needed capital to pay the APS’s outstanding fees.

Shares in Barclays rose by almost a quarter in value ( up 23 pence to 91) on confirmation that it was looking to sell its IShares business.

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Tags: Bank of England, Banking, Barclays, Credit Crunch, Debt, UK Banks

The European Union warned the US yesterday against plunging the world into depression by adopting a planned “Buy American” policy, intensifying fears of a trade war.

The EU threatened to retaliate if the US Congress went ahead with sweeping measures in its $800 billion (£554 billion) stimulus plan to restrict spending to American goods and services.

The EU Ambassador to Washington was reported as saying, that “history has shown us” where the closing of markets leads. This was regarded as a clear reference to the Great Depression, largely regarded as having been triggered by US protectionist laws.

Meanwhile a spokesman for the Prime Minister refused to condemn the “Buy American” clause. He would not say, however, whether Britain was lobbying the new Administration to drop the clause. In the meantime, on the only comment available, suspicions are that Mr. Brown does not want to join criticism of President Obama’s stimulus proposals, which he sees as vindicating his own, remaining, at least in public, in favour of President Obama’s decision to inject cash into the economy

The EU warnings came in letters to US political leaders in Congress, urging them to respect the decision taken by the G20, the world’s leading economic nations, in Washington last November to resist protectionism as a defence against the crisis. They are expected to meet again in London in April.

On the banking front, reports of increasing nervousness around depositing with Irish banks are gaining momentum. The Irish banks are currently offering some of the highest interest rates currently available online. However there are strong fears regarding the stability of country’s banking system, heightened by the news that deposits are no longer protected by the Financial Services Compensation Scheme (FSCS). Instead, all deposits are guaranteed by the Irish government.

Up until September 2008 , deposits held in Irish banks operating in the UK such as Allied Irish and Bank of Ireland, were protected under the umbrella of the FSCS, meaning that any compensation provided by the bank’s local protection scheme up to £50,000 was covered, with the UK government providing “top up ” security for any balances over that sum.

However when the Irish government decided to provide total protection for all of the moneys held in savings accounts by Irish banks, this top up” passport ” was no longer binding, leaving UK deposit account holders vulnerable, FSCS protection.

As a result, and despite the 3.4 percent interest rates available from the Irish banks under their fixed-rate bond paying 3.4 per cent, investor confidence in Irish banks is now falling. Financial analysts are unable to guarantee that the Irish government has the capacity to provide compensation in the event of an Irish bank failing.

All of the UK high street banks are covered by the FSCS, as well as foreign-based banks operating outside the European Economic Area (EEA) that do business in the UK, such as Indian-owned ICICI and Turkish Bank.

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Tags: Bank, Credit, Credit Crunch, Debt, Economics, Economy, Financial News, FTSE, Recession, Retail, UK Banks, UK Recession

Any of the more optimistic investors around who stayed with their HSBC shares for another day thinking that things couldn’t get any worse, discovered that they could with their groups shares toppling another seven per cent (41.25p, to 547.5p )

This share price fall appeared to spur gains for the Standard Chartered bank group whose presence in the Asian banking market appears to provide a more stable setting for investors, at least for the time being. This confidence was reflected by a rise in shares for the group of 2.8 percent.

( 21p, to 766.5p)

The remaining bans shares all continued their seemingly never ending downward climb with Lloyds TSB, down 11.7 per cent, (13.7p, at 103.5p,) Barclays, down 8.2 per cent, (11.7p, at 130.4p), and Royal Bank of Scotland, falling 4.3 per cent, (1.8p, at 39.9p.)

Overall, the market continued its losing streak, with the FTSE 100 falling to 4,121.11, down 59.53 points, and the FTSE 250 losing 158.62 points to 6,204.97.

Property issues were also hit by fears of a possible move to raise capital by the Hammerson group, causing their shares to fall by five percent (24.5p to 469.5p) which retreated to 469.5p, down 5.0 per cent or 24.5p. Hammerson, property portfolio includes some major shopping centers in London and Birmingham.

Cautious optimism was recorded in the mining sector also recovered from recent losses, with Xstrata 1.7 per cent (12.00p to 700.00p). This revaluation was brought about by news that the company were planning to resume mining their McArthur River zinc mine in Australia.

The FTSE 100 Index closed down 59.5 points at 4121.1. with the 250 actually showing a rise of 89.06points to 6294.03 (+1.44%)

Wall Street got a small dose of good news Thursday with JPMorgan Chase & Co. reporting improved fourth-quarter earnings. JPMorgan is the first big U.S. bank to release fourth-quarter earnings, and analysts and investors believe the report could signal how the rest of the industry is faring. The feeling on the street had been that JPMorgan, who acquired the Bear Stearns Cos. and Washington Mutual Inc. last year, has been doing better than most of its peers.

However, optimism was tinged when new reports suggesting that Bank of America might be in need of a government- sponsored capital injection and reports of Citigroup suffering sharp falls before its quarterly results began to filter through.

Overall the Dow Jones industrial average futures rose 6, or 0.07 percent, to 8,165. while Nasdaq 100 index futures fell 19.75, or 1.69 percent, to 1,145.75.

The enthusiasm that began to raise its head late 2008 has been steadily reduced as 2009 begins to open up. The increasingly gloomy outlooks for companies ranging from banks to retailers to energy producers is taking its toll, evidenced by the fact that the Dow has now fallen for six straight sessions.

Sterling was mixed against other major currencies early Friday with rates as follows:

pound/US dollar 1.49254
pound/Euro 1.12801

pound/Japanese Yen 134.823

Gold prices rose as well as light, sweet crude oil that rose 45 cents to $37.73 a barrel in electronic premarket trading on the New York Mercantile Exchange.

In Asia, Japan’s Nikkei stock average dropped 4.92 percent and Hong Kong’s Hang Seng index tumbled 3.37 percent..

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Tags: Bank, Bank of England, Banking, British Economy, British Pound, Credit Crunch, Debt, Finance, Financial News, FTSE, Money Markets, Recession, UK Banks, UK Recession