Did anyone watch BBC's Newsnight last night?

Generali

kennyboy66 wrote: »

Perhaps they mean that the banks should market competitive products to maintain a similar share of the market that they had in 2007.
That would make some sort of sense in that there seems little point in bailing banks out only for them to stop lending anyway.

On the other hand its difficult to see how any government targets about commercial decisions are desirable at all.

If you want banks to lend money on mortgages at rates of 6% then it would be wise to lend money to the banks at a rate of 5% rather than the 12% that the Government has lent on the Preference shares.

Any prudent businessman would repay a debt at 12% before make an investment that will return 6% gross!

I find it extremely worrying that the Government has spent £10s billions of our children's money without apparently considering this fundamental fact.

tomstickland

Fun starts at 07:30

kennyboy66_2

There are a whole host of things I am unsure of.
Could existing shareholders subscribe for preference shares as surely they would find them more attractive than the ords (I think I know the answer).
Are the preference shares redeemable at set dates or can they be redeemed at any time.
It would indeed be entirely logical for any bank to shrink to the point where they can pay off the prefs but end up with the same capital ratio as they will have now (post rights & pref issues)

ManAtHome

Generali wrote: »

If you want banks to lend money on mortgages at rates of 6% then it would be wise to lend money to the banks at a rate of 5% rather than the 12% that the Government has lent on the Preference shares.

C'mon G, try keep up - to replay the govt's 12% the banks just need to lend twice as much at 6%...

dopester

Sir_Humphrey wrote: »

I see that everyone here missed the bit on Newsnight with the Roger Bootle interview where he reckoned prices would fall 30-40%.

Selective criticism of the beeb here I think.

He got what? About 20 to 30 seconds or so of airtime of VT?

Then we had a politician and a developer and an estate agent large-ing it up in the studio for ages.

dopester

Sir_Humphrey wrote: »

I see that everyone here missed the bit on Newsnight with the Roger Bootle interview where he reckoned prices would fall 30-40%.

Selective criticism of the beeb here I think.

One time I went in to the BBC on a weekend to wait for a friend to finish some work she had left over, before going out. Whilst there I agreed to help her out on something else, which was watching a couple of political shows, with a stop watch, and logging the times each political party member got for airtime in the show, and record it to the file.

They should have done the same for all their property !!!!!! crapolo of recent years, and especially now with all the property rampers still on air - next to alternative outlooks.

Generali

kennyboy66 wrote: »

There are a whole host of things I am unsure of.
Could existing shareholders subscribe for preference shares as surely they would find them more attractive than the ords (I think I know the answer).
Are the preference shares redeemable at set dates or can they be redeemed at any time.
It would indeed be entirely logical for any bank to shrink to the point where they can pay off the prefs but end up with the same capital ratio as they will have now (post rights & pref issues)

This is how the LLOY scheme works (I believe the others have the same structure):

AIUI, the share issue is working like a rights issue with the Government underwriting it. That means that investors will be able to subscribe to buying the preference shares and, given that preference shares can't be diluted, they may well end up a very good buy, especially as interest rates are set to fall precipitously as inflation falls.

As the credit crunch comes to an end (it'll take a while - this isn't over yet) then the need for an Aaa rated institution like LLOY to hold enlarged capital reserves will fall and so I suspect that the prefs will be paid back out of tier 1 capital, in effect.

kennyboy66_2

Generali wrote: »

This is how the LLOY scheme works (I believe the others have the same structure):

AIUI, the share issue is working like a rights issue with the Government underwriting it. That means that investors will be able to subscribe to buying the preference shares and, given that preference shares can't be diluted, they may well end up a very good buy, especially as interest rates are set to fall precipitously as inflation falls.

As the credit crunch comes to an end (it'll take a while - this isn't over yet) then the need for an Aaa rated institution like LLOY to hold enlarged capital reserves will fall and so I suspect that the prefs will be paid back out of tier 1 capital, in effect.

I knew it was an underwritten rights issue for the ordinary shares, but still not clear on the preference shares.

Are you saying it will work something like subscribe for 10 ordinary shares and be able to subscribe for 2 preference shares ?

I really struggled to find any real detail on this.

I think if I was Lloyds (who if I get this right are only getting £1bn in prefs plus whatever in ordinary rights issue) then I would just kiss the HBOS deal goodbye.