The government says it intends to take the East Coast rail service, run by National Express, into state ownership. The troubled rail franchise, which is expected to have lost £20m in the first half of the year, is suffering from falling passenger numbers.

Ministers have refused National Express’s requests for its contract with the government to be renegotiated. The Department for Transport said that all East Coast services would continue and that tickets would be honoured Tesco may launch a bid for Northern Rock as the Government attempts to sell off the nationalised lender before the General Election, according to reports. The supermarket chain has shown “provisional” interest in buying the bank which was nationalised as the credit crisis brought the financial system within hours of collapse, the Times reported.
The paper reports Gordon Brown wants Northern Rock returned to the private sector at a substantial profit before an election. Virgin, which tried to buy Northern Rock at the time, has expressed interest but it is understood that the Treasury is not in talks with any potential bidder.

A Tesco spokesman said the report was “pure speculation”.

A Treasury spokesman: “Any decision will be taken in the best interests of financial stability and of the taxpayer. “Our only focus is our discussions with the European Commission around the restructuring of Northern Rock and the implementation of Northern Rock’s new mortgage lending.”

The Government favours a sale rather than a flotation because it would be quicker, the paper reports. Last week MPs said an under-prepared Treasury was “caught flat-footed” by the run on mortgage lender Northern Rock in September 2007. The Public Accounts Committee (PAC) attacked the department’s lack of readiness to deal with a failing bank despite warning signs emerging as early as 2004.

Northern Rock – the first UK bank victim of the credit crunch – was propped up by almost £27 billion in emergency loans from the Bank of England and eventually nationalised in February 2008.

MUSIC and books retailer HMV Group has seen profits soar over the past year despite the recession, it announced today. The retailer reported an 11.5 per cent rise in annual profit, a result which has been helped in part by the demise of the firm’s smaller rivals. The 88-year-old firm, which runs the famous UK high street music, DVD and video games shops, as well as Waterstone’s bookstores, this morning posted profit before tax and one-off items of GBP 63 million for the year ended April 25.
Sales from continuing operations rose 4.4 percent to GBP 1.96bn.

HMV has benefited from the collapse of rivals Woolworths and Zavvi which, after years of struggling with competition from the internet and supermarkets, succumbed at the start of the recession. “We are working hard to maximise both the market share opportunity that has arisen from the withdrawal of competitors, and the investments that have been made over the last two years to improve performance,” an HMV spokesman said. The results were driven by increased sales of games, music and films at the HMV store, with Waterstone’s seeing a drop in sales of 3.6 per cent to GBP 548.3m.

BEFORE the credit crisis of 2007/08, Lloyds TSB was rated the sixth safest banking group in the world. That all changed when it was forced to save HBOS from the knacker’s yard, taking on all of the former building society’s toxic waste. Now renamed Lloyds Banking Group, and 43pc owned by the UK government, Lloyds will report the lowest credit losses of all Europe’s largest capitalised banks by 2011 and will be able to act commercially despite being part-owned by the government.

Favourable broker comment also got Barclays going. It jumped 11.55p to 279.65p after long-term bear SocGen suddenly turned positive in the wake of the [pounds sterling]8bn sale of its Barclays Global Investors arm to Blackrock. It upgraded to hold from sell and raised its 2010 target price to 260p from 36p.

Although SocGen continues to adopt a cautious stance on the bank sector, its top pick is Barclays. It says that while not all of its problems have been addressed, evidence suggests a solid foundation for future independent growth has emerged.

It was frisky financials that helped the Footsie close 53.02 points higher at 4294.03 on hopes that the worst of the crisis is over.

Car insurer Admiral accelerated 271/2p to 8831/2p after Credit Suisse upgraded to outperform from neutral A reassuring trading statement lifted media group Informa 191/4p to 231p. It continues to trade in line with ‘management expectations despite very challenging trading conditions’. Broker Singer Capital Markets says that while the group is lacking a catalyst and remains in debt-pay-down mode, the valuation has become much more appealing.

News that Hargreaves Lansdown is trading ahead of expectations left the close 9p higher at 210p. The investment group said revenues for the 11 months to end-May 2009 are 10pc ahead of revenues for the same period last year. It now expects the full-year outcome to be slightly ahead of top end expectations, currently at [pounds sterling]69.1m.
Insurer Gable Holdings firmed 1/2p to 81/2p on pleasing annual results. Pretax profits rose to [pounds sterling]910,000 from [pounds sterling]510,000 and net insurance margins jumped to 22.5pc from 16.5pc. It recently announced a new contract with a French insurance broker.

Better-than-expected annual results attracted buyers to marketing software company Portrait Software, 33/4p up at 111/2p. It reported a strong second-half of the year and a good start to the current year including a big contract win from Dell Computers.

SDI, the automated warehousing systems specialist, added 5/8p to 51/2p on news of a confirmed order book of [pounds sterling]29m and a pipeline of potential orders of [pounds sterling]21m for the current year.

London equities held reasonably firm on Tuesday, helped by more optimistic data from the UK housing market and support from the resource stocks in line with firmer commodities markets As trading closed, the FTSE 100 had reversed its gain from Monday losing 44.82 points to finish the say’s trading on 4,249.21
The FTSE 250 dropped for the first time in three days, by 62.65 points to close on Sterling’s day was weak against the leading currencies.

Pound/US dollar 1.6436
Pound/Euro 1.711
Pound/Japanese Yen 159.1014
Pound/Swiss Franc 1.7841

US equities rallied on Monday as upgrades in the consumer sector and improving energy stocks helped lift stocks later in the day after an early collapse.
On Wall Street, the Dow Jones finished the day dropping most id its previous day’s gains, down 82.38 points to 8447, while the NASDAQ lost 9.02 points to close on 1835.04.

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Tags: British Economy, Credit Crunch, East Coast rail service, Employment, Financial News, National Express, Northern Rock, Retail, Tesco, UK Recession

There appears to be no arguing with statistics, and the one that says that UK property values for 2009 will reduce by close to 20% as has been predicted. It appeared that property prices were indeed bucking the trend, yet March’s figures showed a 0.3 decline and it appears that April figures will be less than optimistic. It now appears that an overall decline of close to 37% from their peak in 2007 is inevitable, with 2009 being the worst year, where prices will fall by around 2.5%.

Currently the average costs of a house in the UK is around £ 55,000

The decrease in property values is being driven by the reluctance of first time buyers to take a chance on the market, which seemed to be improving just a few weeks ago; however mortgage fell last month for the first time since the end of 2008.

The bank of England hastened to explain that their “quantative easing” scheme is yet to fully kick in, and once it would borrow terms would be less restricted and the public should be more inclined to invest in property. Forever anticipating the demand, rumours have it that finance provider Virgin Money has intimated interest in acquiring certain of the more juicy parts of the Northern Rock building society, when the company is sub divided towards the end of 2009.

Virgin Money is seemingly interested in acquiring seventy high street branches of Northern Rock

There was a lot of nervous coughing and sneezing on the FTSE yesterday with airlines and travel company shares being hard hit as the market began to take into account the possible economic impacts of the swine flu outbreak.

With the flu outbreak in Mexico spreading rapidly with isolated cases already reported in US, Canada, Spain as well as the UK, shares in British Airways dropped by 7.7%, while London quoted cruise giant Carnival could only lie back and watch their shares lose 6.8% on the day’s trading.

But to prove that every cloud does indeed have a silver lining, shares in drug companies took a major turn for the better, with Roche, who have a very important niche in anti-flu drug market having a very good day.

Also basking in shades of victory yesterday were U.K. sportswear retailer JJB Sports PLC whose shares jumped by 31% Monday, after the firm’s creditors eventually agreed to back the company’s hard worked for rescue plan, which will considerably ease the company’s current rental burden and release valuable funds to aid the company’s survival plans. JJB’S success in renegotiating rents is expected to set a precedent for many other retailers in similar positions.

Telecoms stocks were also at the forefront among the profit earners yesterday. Shares in Vodafone rose 2.4 per cent (3 pence to 125.45) after its US joint venture m Verizon Wireless produced some very favourable results

In the oil sector, BP were the stars in a weak sector, with their shares rising 0.9 per cent to (4.5 pence to 483) ahead of today’s first-quarter results.

The retails sector showed some restrained excitement, largely fired by rumours focused on the Sainsbury group. Whether the rumours have any foundation remains to be seen, however the company’s shares pushed up by 1.5 per cent (5 pence to 328)

Overall the FTSE 100 recovered from an early drop to close up 11.02 points to 4,167.01. The FTSE 250 index did a lot worse, dropping 90 points to close at 7,279.93

Sterling fell slightly against the dollar and the Euro and held its own against the Japanese Yen and the Swiss Franc:

Pound/US dollar 1.4563

Pound/Euro 1.119

Pound/Japanese Yen 139.27

Pound/Swiss Franc 1.6817

Fears that a swine flu outbreak could turn into a global pandemic was the principal symptom that caused Wall Street shares to have a weak day’s trading.

The Dow Jones Average dropped 51.29 to close at 8025. NASDAQ also fell 14.88 points to close on 1679.41

The market spluttered and wheezed all day as companies tried to wear down who would lose and who would stood to benefits benefit from the outbreak.

American Airlines shares plummeted by 13.3 per cent to $4.70, with Delta Air Lines also dropping by 14.3 per cent to $6.75. Investors rapidly pinpointed that the travel industry would be the first to suffer and rapidly cancelled their travel plans. Hotel chain Marriott, dropped 5.1 per cent and online travel agency Expedia suffered a similar fate, with their shares dropping 6.3 per cent.

The projection that the demand for steel demand is likely to fall by around 15% cent this year seems to be also accurate. If the current slump continues, According to forecasts issued Monday by the World Steel Association, it will be the greatest in the industry since the end of World War Two.

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Tags: Bank of England, FTSE, JJB Sports PLC, Northern Rock, Recession, swine flu, UK property values, Virgin Money

Who said that there were no jobs around? There are at the Financial Services Authority who apparently have hired and trained close to 200 people to carry out a very specific and important task. The task is to monitor the financial behaviour of firms who the FSA have pinpointed as posing a systemic risk, according to submissions to the Treasury Select Committee.

The reports garnered by the monitoring staff will be known as “stress tests” and those companies who are deemed at risk of collapse will be discussed during formal yet internal meetings to be held by the authority in a regular six months basis.

The results of these tests will remain classified as the FSA believe that publishing the results of individual stress tests could be damaging to the market stability of the individual companies.

The purpose of employing these monitoring staff, according to a recent repost issued by the FSA is to provide the authority’s senior management with increased input designed to provide an oversight of the “supervisory approach” required to guide UK companies who are struggling through the current recession.

According to the FSA statement it is the agency’s intention to increase the coverage of their monitoring tem, and in order to remain on track to meet their target , the authority will have hired and trained close to 300 extra staff by the end of July 2009. The thinking behind this comprehensive and nationwide monitoring scheme is to anticipate and possibly “nip in the bud” some of the more glaring regulatory failings that have become fairly commonplace since the start of the UK financial crisis. Whilst the first and probably best known gaff was the collapse of the Northern Rock building society, which took everyone by surprise, there have been a few others that have also caught the authority unprepared.

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Tags: Bank, Banking, British Economy, Financial News, Financial Services Authority, FSA, Northern Rock, Recession

Treasury owned Northern Rock continue to dazzle the financial world with their prediction that 2009 will be a year that “substantial loss-making” will occur for the company, largely put down to providing for the vast portfolio of bad debt that the building society has accumulated. A spokesman for the company announced on Thursday that more than 3.5% of all of their residential mortgage loans were now sitting in arrears for more than three months, a worrying situation and one that showed an increase of 25% from the previous quarter. The company spokesman them went on to throw the concerned shareholders, largely the UK public, a bone by adding that the company were observing “tentative” signs of improvement in the percentage of clients who were managing to stay out of arrears or at least staying with a framework of three months or less.
Northern Rock, rescued from the brink of bankruptcy in early 2008 continue to cause concern for the Treasury, and yesterday figures will only help in increasing fears that the bank may not be capable of getting itself back on an even keel, despite all the Government efforts to make it happen. That fact that the bank’s long term arrears statistics is almost two and a half times the national average shows that all is not well with the Newcastle based bank.

The bank’s consistent failure to adhere to government directives requiring it to reduce its standard variable rate in line with the bank rate cuts is especially problematic. This is evidenced by the fact that when the bank rate was slashed from 5% to 0.5%, Northern Rocks lending rates stayed at 4.79%, among the highest in the entire UK.

This may have been a ploy to drive some of Northern Rock’s problematic client base to attempt to remortgage elsewhere. However it has proved to be largely unsuccessful, as many of them are now sitting on properties with a real narrow if not negative equity.

On a slightly more positive note, came the news that Northern Rock’s stock of unsold repossessed properties has fallen, down from 420 units from 3,620 at the end of the year to 3,200 at end March 2009

Gross mortgage lending at Northern Rock, for the first quarter of 2009 came to £550m. The bank also hastened to point out a dramatic increase in equity ratios, with the average ratio of new mortgages carrying an average equity of 48%.

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Tags: British Economy, Money Management, Mortgage, Mortgages, Northern Rock, Recession

When the history books are written on what caused the first (and hopefully the last) global financial crisis of the 21st century, what will undoubtedly will be regarded as the “kick off” point in the UK will be the sudden and dramatic collapse of the Northern Rock Building Society. Nobody seemed to really understand the implications of the Bear Stearns Bank and the terminology “sub-prime mortgages” must have meant very little to the average UK citizen, but when the news broke that Northern Rock was in serious financial trouble, and queues began to form around the block to withdraw deposits, then the chilling realization began to form in the minds of many that the golden era of easy finance was over. And that the time had come to pay to the piper.

One of the UK’s biggest mortgage lenders at the height of the property boom, Northern Rock were the first bank to bail out by the Bank of England during the current crisis, as other banks began to refuse them further finance. As the international banking crisis deepened, and no viable private buyer emerged, Northern Rock were eventually nationalised by the government, supposedly on a temporary basis.

A recent report issued by the National Audit Office (NAO) has begun to peel some of the layers of how this long established building society managed to find themselves in such desperate financial straits, and even after they were the Treasury began to inject considerable sums of public money into the bank, Northern Rock, continued to award mortgages that amounted to (at least) 100% of the property’s value in a rapidly declining market. .

According to their findings, the NAO have declared that Northern Rock lent up

£800m to borrowers whose mortgage could be classed as “risky” This meant that the levels of equity in the agreement were less than 30% of the value of the property. The reports goes on to reveal that as late as spring 2008, there were a considerable number of cases recorded where Northern Rock issued mortgages of up to 125% of property values where the prices were continuing to plummet.

This amounted to 30% of its entire mortgage lending at the time although the bank said £1bn of this extra lending had been agreed before September 2007.

Findings of the report also reveal that before the treasury stepped in to rescue Northern Rock in order to protect the public’s savings. The mortgage bank’s lending policy could only be described as “foolhardy.”

Around a third of their clients were holding mortgages that represented more than the property value, with a further almost twenty percent with equities of between 90 -100% and decreasing.

The NAO report, whilst it generally displays its approval of the government’s intervention to protect the bank’s depositors through keeping Northern Rock afloat, does level some criticism on the Treasury for not taking a much closer look at state of the bank’s finances, before it deciding to take the drastic step of totally nationalisation.

The Treasury is to study the report and reply to the public accounts committee at the end of the month.

It might not make for light reading for many with the report stating that the government was not only slow to respond but were totally under-prepared to handle the crisis. Obviously they hadn’t heard of Bear Stearns either!

In the meantime it will not come as a surprise to anyone in recession hardened Britain of 2009, that as a result of mortgage arrears as well as shortfalls on sales of repossessed homes, Northern Rock made a trading loss of £1.4bn in 2008

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Tags: Bailout, Bank, Bank of England, Banking, British Economy, British Pound, Credit Crunch, Financial News, Northern Rock, UK Banks

Few could believe the facts and figures that spewed forth from the housing charity “Shelter” last week. The government is easily the most aggressive lender on the high street when it comes to kicking people out of their homes. As well as that delightful titbit, Northern Rock also has some of the worst savings rates and the highest mortgage rates! Who said the government couldn’t run a bank? They remind me of the infamous East End landlord of the 60’s, Peter Rachman. Is the government guilty of Rachmanism?

Not according to them they aren’t. (Shocker!) But the figures speak for themselves. In the three months to the end of September 2008, Northern Rock repossessed 4201 homes. This figure is higher than many other mortgage lenders and a 20% rise on the previous quarter.

So, should we immediately tar and feather the government for their uncaring attitude at this time? Well, not really. You see, the reason that the Northern Rock had to be saved in the first place was because its loan book was already very shaky. They lent out thousands of mortgagse at 100% and 125% of the value of the property and now that prices have started to come down, it should be no surprise that the mortgage holders are getting into difficulty and defaulting in droves. It isn’t that the government is being really mean and nasty to these borrowers; it’s that Northern Rock, which had to be rescued, has a far higher percentage of these borrowers than most other banks….hence the need to be nationalised.

The situation may yet get worse as the Rocks 2 year fixed rate comes to an end on the 31^st of October and members are moved onto the 7.34% variable rate from the fixed rate of 3.99%. That’s not only going to hurt them as well as taxpayers, but property prices will come under increased pressure from the likely defaults and repossessions that will arise from this. Assume the crash position.

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Tags: Gordon Brown, Loans, Mortgage Lenders, Northern Rock, Peter Rachman, Rachmanism, UK Banks

Northern Rock has increased mortgage rates and pulled many savings accounts in an attempt by the government to shift borrowers and savers onto other institutions. Both measures have had unintended consequences.

For some who bought property near the height of the bubble and who are now coming off fixed rate deals, the blow has been devastating. Not only are many facing large increases in payments as their fix rated mortgages end and they are pushed onto the Standard variable rate, the absolute worst rate to be on, but they are paying more than borrowers of other institutions as the government tries to slim down the loan portfolio.

The portfolio will be slimmed down, but not in the way that many think. The era of the state repossession is upon us. Borrowers who can’t remortgage after borrowing 100% or more of their homes value a few years ago are now not only in negative equity and unable to move to a new mortgage provider, they are also being punished by higher interest rates and unable to remortgage onto a fixed rate deal since no other lender will have them. Of the mortgage holders who have some equity in their homes, they are being forced to pay 2% arrangement fees for new mortgage products at a time when house prices are falling. They are caught between fearful bankers, a government which has turned its back on them and a falling market.

What will happen to these poor souls? Many will be forced to sell or be repossessed if they can’t afford the new monthly payments’ at a time when disposable incomes are being squeezed from every angle.

Savers flooding into Northern Rock hope to benefit from the governments deposit guarantee has seem their deposit rates quickly approaching the 1.5% of capital level that Northern Rock agreed not to exceed once it was nationalised. This makes sense. The queues to get money out of northern rock have turned into queues to open deposit accounts so safeguard against more bank failures or a collapse of the system. The government’s response has been swift and clear. Savings accounts are being cut in number and in return, but the tide shows no signs of turning back. People aren’t necessarily worried about return….safety and preservation of capital is the new game.

So, taken all together, the government has a captive audience of borrowers who are paying punitively high mortgage rates and savers who are accepting tiny interest rates in exchange for government backed 100% capital guarantees.

Who said banking was in bad shape? For the UK government at least, it’s making a killing. Then, when you make the laws and control the nation’s money…anyone can make a killing.

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Tags: Banking, Mortgage, Northern Rock, Savers, Savings