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Showing posts with label Lloyds Banking Group. Show all posts
Showing posts with label Lloyds Banking Group. Show all posts

Friday 24 February 2012

Lloyds, Britain’s biggest mortgage lender plunges to £3.5bn loss for 2011


Rising Funding Costs Imperil Profit in 2011

Part-nationalised Lloyds Banking Group said today that it is "in a significantly stronger position than it was 12 months ago" despite unveiling total losses of £3.5 billion for last year.The losses, which compare with a £281 million profit the previous year and are driven by a £3.5 billion hit to tackle the payment protection insurance scandal, are nearly twice the size of those at fellow state-backed bank Royal Bank of Scotland.

 http://www.independent.ie/video/video-world-news/lloyds-makes-35bn-loss-3030959.html
By  Gavin Finch in London at gfinch@bloomberg.net
Antonio Horta-Osorio - Lloyds
Lloyds chief executive António Horta-Osório is cutting 15,000 jobs, on top of the 30,000 already axed. Photograph: Reuters

Lloyds Chief Executive Officer Eric Daniels


Former Chief Executive Officer Eric Daniels said, “We achieved a step change in our financial performance despite modest economic growth.” Photographer: Chris Ratcliffe/Bloomberg

Lloyds Banking Group Plc, Britain’s biggest mortgage lender, tumbled in London trading as the bank said rising funding costs will squeeze profit margins in 2011.

The net interest margin, the difference between what the bank pays for funds and what it charges for loans, will be unchanged in 2011, Lloyds said in a statement today. The lender is replacing government support with costlier wholesale funding.

“The numbers and outlook statement from Lloyds are a bit of a horror show,” said Ian Gordon, an analyst at Exane BNP Paribas SA in London with a “neutral” rating on the stock. “Lloyds’s second-half performance has been very weak.”

Analysts including Gordon and John-Paul Crutchley at UBS AG said they may cut estimates for 2011 pretax profit by more than 2 billion pounds ($3.2 billion), about a third. Chief Executive Officer Eric Daniels, who will be succeeded by Antonio Horta- Osorio next week, has been trying to wean Lloyds off state aid after the takeover of HBOS Plc in 2008 led to 13 billion pounds of losses and left the taxpayer owning 41 percent of the lender.

The shares tumbled 4.5 percent to 62.85 pence at the close in London, the biggest decline in more than three months.

“The knee-jerk reaction could be some disappointment,” said Cormac Leech, an analyst at Canaccord Genuity Ltd. in London who has a “buy” rating on the stock. “The biggest negative is that the margin will stay flat in 2011.”

Net Interest Margin

Lloyds posted a full-year net loss of 320 million pounds in 2010, compared with a 2.83 billion-pound profit in 2009, the bank said in the statement. Earnings the previous year were buoyed by an 11.1 billion-pound accounting gain on the HBOS purchase. Pretax profit slumped 62 percent to 609 million pounds in the second half of 2010 from the first half.

The net interest margin rose to 2.1 percent from 1.8 percent in 2009. Lloyds cut its reliance on government aid to 96.6 billion pounds in 2010 from 157.2 billion pounds in 2009.

The shares, the second-best performing of the U.K.’s five biggest lenders last year, may struggle to repeat that in 2011 as funding costs and Irish loan losses climb and a government commission weighs whether to break Lloyds up, analysts said. The Independent Banking Commission, which is reviewing competition in the financial services industry, will report in September. Lloyds said today it also expects a “slow recovery over the next couple of years” for the British economy.

“Another extremely challenging year lies ahead,” Gordon said. “There are still very significant bumps in the road.”

Halifax, Oil Losses

Lloyds posted its first full-year pretax profit since the credit crisis today. Profit was 2.2 billion pounds compared with a loss of 6.3 billion pounds in 2009. That beat the 2 billion- pound median profit estimated by 21 analysts surveyed by Bloomberg. Provisions fell 45 percent to 13.2 billion pounds in 2010 from 24 billion pounds in 2009.

Profit was crimped by a 4.3 billion-pound charge for bad loans in Ireland and a 365 million-pound loss on the sale of two deepwater oil drilling rig businesses to Seadrill Ltd. The bank also made a 500 million-pound provision to cover payments it’s making to Halifax mortgage clients because the terms of their loans were unclear.

Lloyds follows Royal Bank of Scotland Group Plc in posting an increase in losses from the implosion of Ireland’s decade- long real estate boom. Edinburgh-based RBS posted a full-year loss of 1.1 billion pounds yesterday, missing analyst estimates as Irish loan losses almost doubled.

“We expect to see further reductions in impairment losses in 2011 and beyond,” Lloyds said in the statement.

‘Radical’ Intervention

Pretax profit at Lloyds’s consumer banking unit rose to 4.7 billion pounds from 1.4 billion pounds. Profit was bolstered as customers reverted to standard variable rate mortgages, which generate more income than fixed-rate loans, Daniels, 59, said on a call to journalists today.

“The stand-out performance in the retail division will undoubtedly raise eyebrows, adding fuel to the fire of those that view the banking behemoth as an anti-competitive force,” said Paul Mumford, a fund manager at Cavendish Asset Management in London. “Increased profits will be met by increased enthusiasm for radical regulatory intervention.”

Daniels, who has overseen a 76 percent plunge in Lloyds share price since he took over as CEO in 2003, said he was “very pleased’ with his tenure at the bank. Daniels told the BBC Radio 4 Today Programme that he hasn’t decided whether to accept his 1.45 million-pound bonus for 2010 even though the board has made an award.

The bank’s core Tier 1 capital ratio, which measures financial strength, rose to 10.2 percent from 8.1 percent as risk-weighted assets declined by 18 percent to 406.4 billion pounds. Lloyds said it expects to meet its target to cut assets by about 100 billion pounds over the next three years.

“We achieved a step change in our financial performance despite modest economic growth,” Daniels said. “While the significant decrease in impairments was a key driver in our return to profitability, we also saw a good performance in the core business.”

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Tuesday 2 August 2011

Barclays, HSBC, BoA among big European, US Banks Job Cuts, Hard Hit !






Barclays job cuts take Europe’s tally to 40,000

Swiss firms hit by impact of soaring franc

LONDON (MarketWatch) — A running tally of planned job cuts by European banks reached around 40,000 Tuesday, little more than halfway though earnings season, as firms that failed to control costs or were over-optimistic about growth make the deepest cuts.

Barclays PLC UK:BARC -0.12%   BCS -0.84%  was the latest to confirm job losses Tuesday, saying it’s already cut 1,400 jobs and indicating the figure could rise to around 3,000 by the end of the year.

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In an interview with The Wall Street Journal, Michael Zink, Citibank's country officer in Singapore, discusses the implications of the U.S. debt-ceiling deal for global markets and the dollar.

The announcement came as the bank reported a 38% drop in net profit to 1.5 billion pounds ($2.45 billion), partly due to compensation it’s paying to customers who were sold inappropriate insurance.

The Barclays cuts take the total announced by banks reporting in the last week to 35,000. On top of that, UBS AG CH:UBSN -7.70%   UBS -4.68%  also confirmed it would slash jobs, with media reports in Switzerland pegging the number of losses at around 5,000.

The total doesn’t include a further 15,000 job cuts announced by Lloyds Banking Group PLC UK:LLOY -3.02%   LYG -4.46%  at the end of June.

Strong franc hurting Swiss banks

UBS and Credit Suisse CH:CSGN -7.77%   CS -4.16% , which is cutting around 2,000 jobs, are facing an uphill battle against the soaring Swiss franc because they have such a big cost base in Switzerland, but receive a lot of their revenue in dollars and euros.



On top of that UBS CEO Oswald Gruebel made a significant effort to rebuild the firm’s fixed-income trading business in the wake of the crisis, but is now cutting back in areas where it’s not making money, said Christopher Wheeler, an analyst at Mediobanca.

“Ozzie is a trader and he’s taking a trader's view by cutting his positions,” said Wheeler.

HSBC Holdings PLC UK:HSBA +0.43%   HBC -0.20%  will cut around 30,000 positions by 2013, reflecting the fact that the bank “massively over-expanded in retail banking,” Wheeler added.

Soaring costs at HSBC have been a significant worry for investors for some time, leading the bank to announce in May that it will withdraw from markets where it can’t achieve the right scale. Read more on HSBC's cost-cutting plans. 
 
Societe Generale analyst James Invine said in a note to clients that costs are still “a mountain to climb” for HSBC and that much of the growth is due to wage inflation in its faster-growing markets.

“That is a cost about which it can do very little, particularly given Asia’s strategic importance for the group,” Invine said.

The Barclays cuts are a mix of trimming a bloated looking corporate banking arm and slimming down European retail banking, as well as trimming its Barclays Capital investment banking arm after some pretty aggressive expansion, said Wheeler.

Barclays was the bank that snapped up the U.S. operations of Lehman Brothers Holdings, including around 10,000 staff, after the U.S. firm collapsed in 2008.

“In bull markets, you can hide a lot,” he said.

“But when you get into these sort of markets you have to address it, because, it sticks out like a sore thumb.”

Simon Kennedy is the City correspondent for MarketWatch in London.

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HSBC Plc is reportedly close to announcing that it will cut thousands of jobs as it embarks on a cost-cutting drive. — Reuters

HSBC may cut 10,000 jobs

HONG KONG: HSBC Plc may cut more than 10,000 jobs as it embarks on a cost-cutting drive, Sky News reported, citing people close to Europe's biggest bank.

The bank's plans had not yet been finalised, Sky News added, citing an insider at the bank

A HSBC spokeswoman in Hong Kong declined to comment.

HSBC's move would be the latest in a wave of cuts announced by the global financial industry, which has been hit by market volatility and lacklustre profits.

Just yesterday, Swiss bank Credit Suisse announced it would cut about 2,000 jobs after a second quarter hit by weak trading activity and the strong Swiss franc.

 
Switzerland's second biggest bank saw net profit fell 52% to 768 million Swiss francs (US$958.9mil), it said on Thursday.

Standard Chartered, Lloyds, Goldman Sachs and UBS are among banks that have announced job cuts in recent months, hit by rising costs and weak revenue growth.

State Street Corp, one of the world's biggest institutional investors, said earlier this month it would eliminate as many 850 jobs from its technology unit as it tried to curb costs.

HSBC has about 330,000 employees worldwide.

The Sky report came after it said in May it was looking for sustainable cost savings of US$2.5bil to US$3.5bil in order to reach a cost efficiency ratio target of 48%-52% by 2013.

It also said it would be conducting a strategic review of its cards business in the United States, and would limit its retail banking operations to markets where it could achieve profitable scale.

It already cut 700 jobs in its UK retail banking arm in June this year out of its staff of 55,000 in the country, one of many banks that have said they will cull jobs to save costs as lenders fight off a limp economic recovery.

HSBC shares in Hong Kong were down 1.1% by noon yesterday, in line with the broader market's 1% decline. - Reuters

Big Banks Hit Hard In Market Sell-Off

DAVOS/SWITZERLAND - Brian T. Moynihan, Preside...Image via Wikipedia
Big U.S. and European banks were hit hard in Thursday’s stock sell-off, highlighting investor concerns about some of the more prominent financial institutions.

In the U.S., Bank of America’s stock fell by 7.44% and has now tumbled by 33% this year. Bank of America’s chief executive, Brian Moynihan, will now really have his work cut out for him next week when he plans to take questions on a public call hosted by Bruce Berkowitz, the rock star hedge fund manager who has taken a big and controversial position in the nation’s biggest bank.

The KBW Bank Index fell by 5.3%, but some of the biggest banks in the U.S. fell more, like Citigroup, which fell by 6.6%. Big banks like Citigroup are struggling to deal with surging litigation costs stemming from the credit crisis while also dealing with more stringent capital standards.

The situation in Europe is worse, where investors are starting to wonder more and more about the Italian government securities being held by the large European banks, not to mention IOUs from the other countries like Spain. Italy is really getting more mired in the euro crisis and UniCredit shares tumbled by more than 9% on Thursday. Lloyds Banking Group has now seen its shares lose nearly half their value in 2011.

The decline in bank stocks could add momentum to the job cuts already being implemented on Wall Street and the banking sector. HSBC recently said it would slice 30,000 jobs. It will also potentially weigh on the economic recovery. But at least some banks are making the best of an ominous situation. Bank of New York Mellon said on Thursday it will start to charge clients fleeing to safety a fee for extraordinarily high deposits.

Wednesday 29 June 2011

Tsunami of repossessions, home prices declined in UK & US !





Bank chief warns of wave of home repossessions if rates rise

UKAR chief presiding over £80bn of bailed-out mortgages says 'tough love' would be fairer on those struggling with payments
  • Jill Treanor  guardian.co.ukHouses
UKAR chief Richard Banks has warned that mass home repossessions could follow any interest rate rise Photograph: Owen Humphreys/PA

Britain is facing a 'tsunami' of house repossessions as soon as interest rates start to rise, one of the country's leading bankers has warned.

Richard Banks, the chief executive of UK Asset Resolution (UKAR), the body that runs the £80bn of mortgages bailed out by the taxpayer during the banking crisis, also said in an interview with the Guardian that the Labour government's pleas at the start of the crisis for lenders to keep families in their homes was forcing some homeowners further into debt.

In a warning that the industry may have been too lenient with some of its customers, he said he believed a policy of "tough love" would be fairer to people facing long-term difficulty in keeping up payments on loans taken out when house prices were at their peak and personal incomes on the rise.

His warning came the day after the international bank regulator said the Bank of England, which has kept rates at 0.5% for more than two years, would have to raise rates shortly to curb inflation.

The Bank of International Settlements said the policy of the Bank of England, whose rate-setting committee is split over whether or not to increase borrowing costs, was "unsustainable".

With 750,000 customers, UK Asset Resolution, set up to run the nationalised mortgages of Bradford & Bingley and parts of Northern Rock, is the country's fifth largest mortgage lender. But 23,000 of those mortgage holders are more than six months behind with payments and Banks admitted the projections for the number of people falling behind on payments could get "scary" if lenders did nothing to prepare for higher rates.

"You can see if you don't do something about it, you can see a tsunami," he said. "If you don't get into the hills you could get drowned by this. If you don't manage this properly it could get very messy."

He regards it is an industry-wide problem, albeit one that might be concentrated at UKAR as its customers include buy-to-let landlords and so-called self-certified borrowers – those without salaried income. UKAR, through three calls centres in Crossflatts, West Yorkshire, Gosforth, Newcastle, and Doxford, Sunderland, has begun cold-calling customers it believes are at risk of falling behind on payments in an attempt to keep their mortgage payments on schedule.

The bank is also trying to tackle customers behind with payments for six months or more and at risk of repossession.

His concern about a surge in repossessions is partly the result of moves by the industry early in the 2008 crisis to grant so-called forbearance to help customers stay in homes by, for example, reducing monthly interest payments. "We as an industry, as a kneejerk reaction in the emergence of the crisis, and because the government asked us to be forbearing to customers in the hope it would all go away, we have been too lenient with some customers.

"It's a tough love approach," he said. "It's treating customers fairly, not nicely, because if you can't afford your mortgage you are only increasing your indebtedness. If we allow you to increase your indebtedness, that's not really fair to you."

This month the Council of Mortgage Lenders forecast a rise in repossessions from 40,000 this year to 45,000 next. This figure would still remain well below the 75,500 peak of 1991. The remarks by Banks follow a warning last week from the new regulator set up to spot financial risks in the system – the Financial Policy Committee (FPC) inside the Bank of Englandthat warned banks may be providing a "misleading picture of their financial health" if they were not making big enough provisions for borrowers in difficulty.

Forbearance has been brought into play in up to 12% of mortgages, the FPC said.

It also noted that the most "vulnerable" households were concentrated in a few banks. It did not scrutinise UKAR but noted that the two other bailed-out banks, Lloyds Banking Group and Royal Bank of Scotland, had the largest exposure to customers whose mortgages were bigger than their value of their homes.

Last month, the Financial Services Authority issued a guide to handling forbearance in which it warned: "Arrears and forbearance support provided with due care by firms has a beneficial impact for both the firm and the customer … However, where such support is provided without due care or any knowledge or understanding of the impacts, it has potentially adverse implications for the customer, for the firm's understanding of the risks inherent within its lending book, and in turn for the regulators and the market."

House prices down in England and Wales

LONDON: House prices in England and Wales have edged lower this month to show their biggest annual fall since October 2009, a monthly survey from property data company Hometrack showed on Monday.
Average house prices dropped by 0.1% in June, continuing a pattern of modest falls so far this year and taking the year-on-year decline to 3.9%.

Other house price surveys have shown similar price falls over the past 12 months. Prices dropped by around 20% during the financial crisis, but partly recovered in early 2010.
Hometrack's director of research Richard Donnell said that the property market had been less weak so far this year than he had expected.

A general view of houses in Grange Villa, England. — AP
 
“Low transaction volumes, low mortgage rates and forbearance by lenders limiting the number of forced sales have all played their part. While average prices have slipped back by 1%, sales volumes have increased off the back of higher demand and greater realism over achievable prices,” he said.

House prices are under pressure from slow wage growth and lenders' preference for much higher mortgage deposits than before the financial crisis.

Hometrack's data is based on a monthly survey of estate agents and surveyors, asking for average achievable prices for different categories of property. - Reuters


Home Prices in 20 U.S. Cities Probably Declined in April From Year Earlier

Home Prices in U.S. Cities Fell 4% in April from Year Ago
Home prices probably decreased in April, showing the housing market remains an obstacle for the U.S. recovery, economists said before a report today.

The S&P/Case-Shiller index of property values in 20 cities fell 4 percent from April 2010, the biggest year-over-year drop since November 2009, according to the median forecast of 30 economists surveyed by Bloomberg News. Other data may show consumer confidence held near a six-month low.

A backlog of foreclosures and falling sales indicate prices may decline further, discouraging builders from taking on new projects. The drop in property values and a jobless rate hovering around 9 percent are holding back consumer sentiment and spending, which accounts for 70 percent of the economy.


“Home prices remain incredibly bogged down by foreclosures and weak demand,” said Sean Incremona, a senior economist at 4Cast Inc. in New York. “The picture is unlikely to change much this year. Declining home prices and high unemployment are bad for confidence.”

The S&P/Case-Shiller index, based on a three-month average, is due at 9 a.m. New York time. Survey estimates ranged from declines of 4.9 percent to 3.5 percent. Values fell 3.6 percent in the 12 months to March.

The New York-based Conference Board’s consumer confidence gauge, due at 10 a.m., rose to 61 from 60.8 in May, according to the Bloomberg survey median. Estimates ranged from 55 to 66.7.

Fuel Costs

Some of the improvement probably reflects a drop in fuel costs. The average price of a gallon of regular gasoline fell to $3.57 on June 26, down from a May 4 price of $3.99 that was the highest in almost three years, according to AAA, the nation’s largest auto club.

The projected rise in confidence contrasts with other surveys in which Americans’ moods dimmed. The Bloomberg Consumer Comfort index dropped in the week ended June 19, the first decline in five weeks, and the Thomson Reuters/University of Michigan sentiment gauge fell more than forecast this month.

The Case-Shiller report may show home prices fell 0.2 percent in April from the prior month after adjusting for seasonal variations, the 10th straight decrease, according to the Bloomberg survey.

The year-over-year gauges provide better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.

Shiller told a conference in New York this month that a further decline in property values of 10 percent to 25 percent in the next five years “wouldn’t surprise me at all.”

Fewer Sales

Reports earlier this month showed the housing market is yet to gain momentum. Sales of previously owned homes, which comprise about 94 percent of the market, were down 3.8 percent last month from April, the National Association of Realtors said.

Purchases of new houses dropped 2.1 percent in May, the first decline in three months, according to Commerce Department data. Competition from foreclosed homes is hurting demand for newly built dwellings.

The 1.8 million-unit inventory of distressed homes nationwide that may reach the market would take about three years to sell at the current pace, Daren Blomquist, communications manager at RealtyTrac Inc., said this month.

As house prices decline, owners feel less wealthy and home equity shrinks, making borrowing more difficult.

The Standard & Poor’s Supercomposite Homebuilding index lost 4.4 percent as of June 27 from the end of April, less than a 6.1 percent drop in the broader S&P 500 gauge, which was weighed down largely by concern about the European debt crisis.

Builder Outlook

Some developers expect demand to stabilize following a poor selling season. Lennar Corp. (LEN), the third-largest U.S. homebuilder by revenue, last week said second-quarter sales fell from a year earlier and home orders were little changed, while the average price climbed. The 2010 orders were boosted by a federal tax credit for homebuyers that required contracts be signed by April 30.

“While it’s now well documented that the expected spring selling season of 2011 simply did not materialize, it is beginning to feel like the worst days of the housing market are getting behind us,” Chief Executive Officer Stuart Miller said during a conference call with analysts on June 23.
Bloomberg Survey

================================================================
Case Shiller Cons. Conf
MOM% YOY% Index
================================================================

Date of Release 06/28 06/28 06/28
Observation Period April April June
----------------------------------------------------------------
Median -0.2% -4.0% 61.0
Average -0.2% -4.0% 61.0
High Forecast 0.4% -3.5% 66.7
Low Forecast -0.5% -4.9% 55.0
Number of Participants 17 30 70
Previous -0.2% -3.6% 60.8
----------------------------------------------------------------
4CAST Ltd. --- -4.1% 61.5
ABN Amro Inc. -0.1% --- 61.0
Action Economics --- --- 63.0
Aletti Gestielle SGR --- --- 60.0
Ameriprise Financial Inc --- --- 61.5
Banesto --- -4.1% 61.7
Bank of Tokyo- Mitsubishi --- --- 59.0
Bantleon Bank AG --- --- 60.0
Bayerische Landesbank --- -4.0% 62.0
BBVA --- -3.9% 60.8
BMO Capital Markets --- -4.4% 62.0
BNP Paribas --- --- 58.0
BofA Merrill Lynch Resear --- -3.9% 61.0
Briefing.com --- -3.8% 59.0
Capital Economics -0.4% -4.1% 65.0
CIBC World Markets --- -4.2% 62.5
Citi --- --- 61.0
Commerzbank AG --- -4.0% 60.0
Credit Agricole CIB --- --- 62.0
Credit Suisse --- -3.8% 55.0
Daiwa Securities America --- --- 62.0
DekaBank --- --- 61.5
Desjardins Group --- -3.9% 61.0
Deutsche Bank Securities --- --- 62.0
Exane --- --- 61.5
Fact & Opinion Economics --- -3.5% 59.0
First Trust Advisors --- --- 59.9
FTN Financial --- --- 60.0
Helaba --- --- 60.0
HSBC Markets -0.2% -3.9% 60.0
Hugh Johnson Advisors --- --- 60.5
IDEAglobal --- -4.0% 60.0
IHS Global Insight --- -3.9% 61.0
Informa Global Markets --- --- 61.0
ING Financial Markets -0.2% -3.9% 63.0
Insight Economics --- -3.9% 59.0
Intesa-SanPaulo --- --- 63.0
J.P. Morgan Chase -0.1% -3.8% 60.5
Janney Montgomery Scott L -0.3% -4.8% 62.0
Jefferies & Co. --- --- 62.0
Landesbank Berlin --- --- 58.0
Manulife Asset Management --- --- 61.0
Maria Fiorini Ramirez Inc --- --- 62.5
MF Global -0.5% -4.2% 60.5
Moody’s Analytics --- --- 59.0
Morgan Stanley & Co. --- --- 64.0
Natixis --- -4.0% 61.0
Nomura Securities Intl. --- -3.9% 59.8
Nord/LB --- --- 60.0
Parthenon Group -0.4% --- 59.7
Pierpont Securities LLC --- --- 64.0
PineBridge Investments 0.4% --- 61.5
Raiffeisenbank Internatio --- --- 62.0
RBC Capital Markets --- --- 62.0
RBS Securities Inc. --- --- 59.5
Scotia Capital --- --- 59.0
SMBC Nikko Securities -0.1% -3.8% 63.0
Societe Generale -0.2% --- 66.7
Standard Chartered -0.3% -4.8% 61.0
State Street Global Marke 0.1% -3.6% 60.1
Stone & McCarthy Research --- --- 62.5
TD Securities -0.5% --- 60.0
UBS -0.2% -3.9% 62.0
UniCredit Research --- -4.0% 61.0
Union Investment --- --- 61.8
University of Maryland -0.4% -4.1% 60.0
Wells Fargo & Co. --- --- 59.3
WestLB AG --- -4.9% 60.5
Westpac Banking Co. --- --- 60.5
Wrightson ICAP 0.0% --- 63.0
================================================================
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net