Bargain Hunt - Which shares do you have your eye on as they fall?

IronWolf

Reaper wrote: »

EDIT: According to Martin's latest news item the only way Banco Santander can take money out of the UK arm is via a dividend. Is that true? If so surely it guarantees they have to keep paying the preference share holders or they can not withdraw anything?

Probably true although I'm sure there are ways around it. e.g. Santander UK just classifies it as a loan with very low interest.

Glen_Clark

Reaper wrote: »

I agree, they can do what they like with the profits and a dividend cut is therefore quite possible, likely even. It is only if the Spanish branch started grabbing UK assets that the FSA would step in.

EDIT: According to Martin's latest news item

The thing that caught my eye in that web link was this quote;

QUOTE: A spokesman says Banco Santander "cannot, at the press of a button, take all the money out of its UK operation to prop up its business there [in Spain]".

He didn't say they can't do it. He only said they can't do it by pressing a button.

Ultimately, of course, like every bank, if people think it will fail then it will fail. Because they will all try to withdraw their money at once. That would be enough to bust any bank.

atush

I don't see what the FSA can do about it. Santander UK is wholly owned by Banco Santander and they can do whatever they want with the profits. I can't see them raiding the balance sheet, but if the parent needs money they first thing they'll do is cut the dividends of all their subsidiaries and use the cash to strengthen their balance sheet.

i don't recall regulators coming in when Lehmans US took all Lehmans UK cash the night before they went bust.

Reaper

atush wrote: »

i don't recall regulators coming in when Lehmans US took all Lehmans UK cash the night before they went bust.

In Lehman's case there was no ring fence. The FSA have said they have had a "regulatory order" in place on Santander since December:
"With the full co-operation of Santander UK, the FSA has in place arrangements that require the FSA to give permission to any transfer of funds out of the UK by Santander UK." URL="http://www.guardian.co.uk/business/2012/may/18/santander-uk-funds-fsa?newsfeed=true"]source[/URL

P.S. Interestingly (according to Sky) it seems to have been Santander UK which asked for the order to be issued, presumably to protect it from its parent!

atush

I guess those ring fences were brought in after the Lehman's shuffle? And yes, it is good to have safety from a greedy parent (or it's creditors).

KSF, an IOM sub of Kaupthing, was in fact solvent but went bust when the UK treasury seized their UK deposits saying they 'belonged' to the parent company.

In fact, AFAIK, the KSF receivers have already clawed back over 82% of all funds for depositors (incl all those who had funds invested over and above the guaranteed limit) and are still chasing up others. And that could apparently be due to the fact that some assets such as properties mortgaged have dropped in value during the period.

If I had funds in smaller banks and BS in spain I might be worried. But give Santander doesn't do the lions share of their businees in spain, I can see them coming out of this. Although a run on any bank will hurt it. There is a reason to avoid Santander, but it is mostly due to their poor customer service. They seem to have no ability to consolidate the systems and depts in all their purchased companies. The right seems never to know what the left is doing.

sabretoothtigger

Well Santa came with my dividends & bought some more shares.
I have a few brokers so one of them paid cash -20% taxes and the other got shares which Im also ok with as I have sold them a few times to collect the money so I dont mind buying back at a low price


When they pay four times a year at least I'll know sooner then later any change to this policy.
I believe instead of cutting the official rate paid they just make it very easy for people to receive shares instead which means the company is not losing the capital to outflow hence is more likely to keep paying out. They do tend to be smart on these things

Glen_Clark

sabretoothtigger wrote: »

I believe instead of cutting the official rate paid they just make it very easy for people to receive shares instead which means the company is not losing the capital to outflow hence is more likely to keep paying out. They do tend to be smart on these things

Won't the Company will be buying its own shares to pay dividends with?
I thought they did it this way to keep the short term share price up, and consequently the Director's Bonuses.

Glen_Clark

Reaper wrote: »

I have loads of RSA Insurance shares now, both preference and ordinary.

The ordinary shares are now offering a ludicrous yield of over 9%. I can only assume the city must think a dividend cut is on the cards but for the life of me I can't work out why. They have minimal direct exposure to Europe, though I suppose some domino effect could cascade through the whole financial system.

If anybody can explain why they are so cheap please tell me. Other insurance companies such as Aviva and Resolution have similar yields though I think are less attractive (eg Aviva has more exposure to Europe).

Because that is based on past profits. Future profits are what matters, and they are not expected to be so high. Particularly as RSA Investment returns will have taken a battering.

Shares look extremely cheap because the market is anticipating a Euro break up. When that actually happens, they may well get cheaper.

Glen_Clark

UK coal looks a snip at 12p, since last years profits were 18p.
PE ratio is about 0.7 !!!
Unfortunately, what was the jewel in their crown, Daw Mill Colliery, looks like it will have to close - at great expense.

sabretoothtigger

Small companies can be extreme like that. I know a few

Glen_Clark wrote: »

Won't the Company will be buying its own shares to pay dividends with?
I thought they did it this way to keep the short term share price up, and consequently the Director's Bonuses.

That costs money. I dont think they in trouble but they do have debt and interest to pay. They are getting holders to do as much by taking shares instead
When they clipped STD rating it was inline with the country, they are ranked the same and also the banks hold government debt as security.

Every bank does but a spanish one holds more spanish ones. Each division I think would hold respective bonds for that country so relys on its prospects. UK SAN own extremely high price gilts now I reckon


SEA is a mostly cash enterprise, they sold the golden chicken. We could say similar on Cairn, but they still own some with nice income but HOIL is cash 1 tiny working asset.
ZEN is valued at cash and not profitable but with much illiquid asset, they refuse to be taken over also HOIL is half its last bid offer

consequently the Director's Bonuses.

I think they paid in shares . Ive said all along just force all bonus to be in shares fixed for 5 years