(click on the chart for a larger image)Northern Rock is about to jump back into the lending business. After a year or so of trying to pay down its debt to the Bank of England, and shrinking its balance sheet, NRK is going to start growing again.
Nevertheless, it is interesting to see what has happened to the NRK balance sheet over the last year. The bank hasn't become that much smaller. Assets are down only around ₤5 billion. However, the composition of assets has changed dramatically, the proportion of mortgage loans is down, while cash holdings is up sharply.
To a greater or lesser extent, all UK banks have been trying to follow this basic strategy; build up cash balances and get out of the housing market.
4 comments:
Post-bubble, cash is always king.
Roy, I wish cash really was king !
As a saver and someone who was fiscally resposible during the boom years, I feel VERY bitter that people like me are now being royally shafted by almost zero interest rates in a feeble attempt to re-ignite Gordon Brown's miracle economy.
Why should people who are capable of managing their finances by being prudent and taking responsibility for themselves be called upon to bail out those that never gave a damn and those that helped people with nothing, have it all ?
I want ALL savers to give Gordon Brown a right bloody nose at the ballot box - assuming he lasts that long as PM !
Also, I want ALL savers to be not afraid to move their money to get the best rates and give a clear message to the banks that it is our money they are holding and we expect some reasonable return.
So Crock has been forced to offload its good risks (and good customers), by reducing its loan book via unfavourable renewal conditions moving those clients to other institutions.
Now the great genius has ordered that it should hover up all the dodgy stuff out there (ie start lending again) that the remaining lenders won't touch, ever up to 90% or purchase price.
This looks like a toxic bank in the making.
Is is just me or does the 20% of the "assets" made up from *derivatives*, "other advances" and "fair value adjustments" sound like a bit spooky & ephemeral?
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