Subscribe Feed (RSS)Whitehall casts an anxious eye over Lloyds as they prepare a massive rights issue.
August 11th, 2009 by tom | Filed under Central banks, Daily News, Debt, Exchage Rate, Money Management, Recession, Stocks and shares, The Markets, UK Banks, World Banks.
Last week’s announcement of Lloyds Banking Group’s intentions mount a rights issue planned to raise up to £20 billion in a rights issue has caused no uncertain amount to Chancellor Alasdair Darling and his team as well as those private sector investors who have seen fit to buy some of the bank’s shares. .
In an understandable nut possibly ill timed attempt to reduce the reliance on the UK government, Lloyds’ management began to test the water on the concept that the terms of its participation in the government’s asset protection scheme (APS) might be open to re-negotiation after their second-quarter results were much more positive than analysts anticipated.
However it does appear that the bank will not be met with too many friendly faces when they set about convincing Darling to take a second look at the basic terms of the scheme after several months of highly complex negotiations have been put to bed. ..
Chancellor Darling’s long held standpoint on the APS as the international model for cleaning up toxic assets is believed to be untouchable. In addition, government officials are reported to be of the opinion that raising Lloyd’s ability to raise sufficient capital is questionable, and any attempts to sidestep the scheme would be not only be unwise, infeasible or sufficient to satisfy regulators.
The financial implications of Lloyds opting out of the APS could be fundamental, with the bank having to rise between £30 billion and £40 billion in capital to satisfy the regulator’s stress test. In addition, the UK government could be entitled to demand compensation for carrying £575 billion of the banks liabilities since March of this year.
The Financial Services Authority reported yesterday that the number of new financial companies seeking UK regulatory authorisation have risen by ten per cent during the second quarter, making for the first increase since early 2008.
Independent financial advisers, including those who offer life assurance and other retail ¬products were reported to comprise the single largest group.
Next in line were financial advisory services, private equity shops and corporate finance boutiques. Cottage financial service industries that have been established by ex-city financiers who fled the mainstream banks during the recent turmoil in the financial sector.
The number of firms cancelling their authorisation with the FSA also slowed by 18 per cent in the three months to June, according to another recent study.
On the FTSE yesterday, shares in the BT Group were very much in demand after positive analyst reports.
The reports stated that BT’s broadband business looked set to benefit from Tiscali’s exit from the UK and Vodafone’s failure to capture a share of the market. Shares in BT rose 2 per cent to 134 pence.
Banks led the fallers amid the growing debate about whether Lloyds Banking Group should pursue their controversial rights issue scheme.
Lloyds fell 4 per cent to 98 pence, while shares in Royal Bank of Scotland dropped 3.6 per cent to 45 pence and Barclays also lost 1.8 per cent to close on 358½ pence,
Enterprise Inns slid 1.9 per cent to 172 pence after two of the company’s senior directors took advantage of their share’s rebound.
Ted Tuppen, group chief executive, raised more than £500,000 after selling 300,000 shares at 167 pence each, while CEO Simon Townsend cashed in 67,500 shares for 173 pence. Enterprise share values have jumped by more than three times since December, when both directors increased their shareholdings.
Shares in IT services group Logica were up 1.3 per cent to 113 pence after claims that the company was a potential bid target for BAE Systems.
BAE, 1.5 per cent higher at 325½ pence have been known to be actively on the lookout for acquisitions in an attempt to expand their security operations currently focused on the defence sector, making Logica’s public service operations a credible target..
There was unexplainably strong volume in instrument maker Spectris, whose shares closed 2 per cent higher at 576 pence.
The FTSE 100 drifted from its high of the year, losing 9.36 points, or 0.2 per cent, to 4,722.2.
Meanwhile the FTSE 250 closed just half a point down on 8,421.46
The pound stepped backwards against the other major currencies.
- Pound/US dollar 1.6483
- Pound/Euro 1.1654
- Pound/Japanese Yen 159.6125
- Pound/Swiss Franc 1.7853
The news that the US banks stand to collect a record $38.5 billion in overdraft fees this year has left a bitter taste in the mouths of many. Even more so when considering that the bulk of the revenue will come out of the pockets of already financially stretched consumers, struggling to keep their heads above water during the current financial downturn.
Overdraft fees have almost doubled during the last decade, and seem inappropriate when considering the political pressure applied to banks to ease the burden on after being bailed out by taxpayers.
The Federal Reserve is working on rules on overdraft fees, and rules on customer charges could be a priority of the Obama administration’s proposed Consumer Protection Agency if approved by Congress.
US stocks drifted from last week’s highs on Monday, with investors looking to bank profits even as several experts gave a relatively bullish analysis for equities.
However sellers far outnumbered buyers on Monday’s trading
On trading Monday, the Dow Jones index eroded a little down 32.12 points, to close on 9,337.95. The NASDAQ also dropped below the 2,000 mark again, down 8.01 points to close at 1992.24.
Latest reports prior to President Obama’s visit are that Mexico has moved into its deepest recession of modern times.
Figures to be announced on gross domestic product in the second quarter is expected to report a 10.4 per cent fall, following a first-quarter drop of 8.2 per cent, according to the finance ministry.
The International Monetary Fund predicts that, for the full year, the economy will fall by 7.3 per cent, the worst performance in Latin America.
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Tags: Alasdair Darling, BAE Systems, Bank, Banking, British Economy, British Pound, BT Group, Credit Crunch, Currency, Dow Jones, Economics, Economy, Federal Reserve, Financial News, Financial Services Authority, FTSE, International Monetary Fund, Lloyds, Lloyds Banking Group, Logica, Money, Money Markets, NASDAQ, Obama administration, Recession, Royal Bank of Scotland, Simon Townsend, Stocks and shares, Ted Tuppen, Tiscali, UK Banks, UK government, UK Recession, US Banks, Vodafone, Whitehall
