Thursday, 19 June 2008

HBOS talking house prices down

HBOS decided to push out as much bad news as possible. In the run-up to their rights issue, the management figured that it was better the world knew the truth rather than speculated on what was hidden on the balance sheet. Here are the key facts:

  • 38 per cent of its corporate book comprises of loans or equity finance for the property and housing sectors. However, we shouldn’t worry as the "debt is safety underpinned by collateral values including landbanks".
  • Buy-to-let and self-certified mortgages make up 25.7 per cent of the total book.
  • Arrears on specialist mortgages – such as buy-to-let and self-certified mortgages – were 3.09 per cent of the total value, with the figure for self-certified mortgages at 3.95 per cent.
  • 1.89 per cent of its mortgages by value were in arrears at the end of May , a rise from 1.67 per cent at the end of December.

    Otherwise, everything is fine. The bank has been trading "satisfactory" in the five months to the end of May and in line with its expectations.

    However, the bank now believes that house prices would fall 9 percent this year, which is the same number I suggested. Do you think HBOS management could be reading the blog?

    Anonymous said...

    A case of getting the dirty washing out before anyone notices, perhaps.

    aSteve said...

    I think your 9% this (calendar) year would be extremely optimistic... and 9% this financial year is off-the-page.

    I think HBOS said 9% because they'd not be able to keep a straight face if they said anything less. HBOS are definitely in trouble - as evinced by their 10% savings account!

    Anonymous said...

    Otherwise everything is fine.