Lloyds v Nationwide

robmatic

mulronie wrote: »

Nationwide is a very odd institution - it makes a tonne of profit each year (£179m last year after tax) from its members, but instead of returning it in the form of top savings rates or a divi, it sticks it into "retained earnings" and uses it to balloon its balance sheet - growth for the sake of growth (on which I'm sure the directors have their "pay for performance" measured).

At least Lloyds profit accrues in part to shareholders (including HM Taxpayer), instead of going into the black hole of a mutual's balance sheet never to be seen again.

On the basis that Lloyds had to be bailed out at massive expense by the taxpayer and Nationwide thus far hasn't failed in such a spectacular way, I would suggest that there are some very positive aspects to a mutually owned business building a strong balance sheet.

MoneySaverLog

Lloyds TSB had a strong balance sheet until they were force to buy up Halifax. Since then the value of Lloyds TSB shares have been heavily diluted and now next to worthless compared to what they were before bailing out the Halifax.

grey_gym_sock

a building society needs to make a certain amount of profits, and to retain it, to maintain its financial stability. banks need to aim for higher profits, because they both need to retain profits for stability, and to (at least sometimes) pay dividends (or pay for take-overs etc).

i don't believe that lloyds were forced to buy hbos. their directors wanted to do it. there is nothing unusual in companies overpaying for acquisitions. why that tends to happen is another topic, which we could discuss if ppl like. it's true that the government was also in favour of the take-over, apparently in the mistaken belief that it would remove the need for them to bail out hbos. but it's the lloyds directors who have responsibility to look after lloyds shareholders' interests, not the government.

while it appears that the worst of lloyds' problems stem from hbos, they also turned out to have problems of their own.

MoneySaverLog

Why would a "at the time" successful bank buy up a failing bank along with its toxic debt?

Is that looking after the interests of the shareholders?

sabretoothtigger

They didnt quite get that it was toxic. That is just slang of course, these worthless assets could be quite profitable but they may not know for 20 years.

Also Halifax broke a few rules like lending and taking shares in the same company meaning they lost twice over if that business faltered

grey_gym_sock

obviously, they failed to look after the interests of shareholders. my point is precisely that the lloyds directors failed in their responsibilities. the government didn't, because it's not their responsibility to make commercial decisions in the interests of lloyds shareholders. and i don't believe that government forced lloyds to take over hbos.

why did lloyds do that? because the losses in hbos were far greater than they realized at the time. because they also didn't know the extent of the losses that lloyds already had, which would make it more difficult for them to absorb hbos. because they thought that they could make big cost savings and charge higher prices to customers because of the reduced competition after the take-over. because they thought (probably correctly) that this was a rare opportunity in which the government would allow them to make a take-over that they would under normal circumstances block on competition grounds. because directors tend to go for take-overs (especially big ones) when it's not in shareholders' interests, because the interests of shareholders and directors are not properly aligned, and the kind of ppl who get to run big companies are aggressive and always want to run something bigger.

rb10

MoneySaverLog wrote: »

Why would a "at the time" successful bank buy up a failing bank along with its toxic debt?

Is that looking after the interests of the shareholders?

Because they feared what was around the corner for them.

Lloyds TSB commercial (successful) was propping up Lloyds TSB retail (failing). The same problem as HBOS, but the other way around.

Buy up HBOS (failing commercial but successful retail) and (they hoped) the problems would net-off.

They knew that their profits were being supported by commercial banking. I am sure that they forecast the downturn in the commercial market that we have seen in recent years, and realised that, if they did nothing, they'd end up with a failed retail bank and a failed commercial bank.

The merger with HBOS has at least allowed them to retail a successful retail bank. From those who I know who are 'in the know', it was a blessing in disguise for Lloyds TSB.

Thrugelmir

grey_gym_sock wrote: »

but it's the lloyds directors who have responsibility to look after lloyds shareholders' interests, not the government.

.

Interesting though how a £25 billion loan from the Treasury was kept quiet. While Lloyds undertook a capital raising exercise. At the very least collusion at the highest level.

The Government of the day could not afford HBOS to collapse.

kar999

Archergirl wrote: »

.......She would hate to miss out on any bonus to Lloyds customers as she has been with them for about 25yrs.

No bonus or loyalty on offer from Lloyds... quite the reverse.

I have been with Lloyds for over 35 years and they have now decided to "reward me" with charging me £12.95 p month for my Gold Current account. Previously, as a long standing customer, I got the benefits like worldwide travel insurance free so long as I keep £2k in the account.

I have just today opened online a Nationwide no-fee paying current account offering free European travel insurance so long as they get £750 p month. I'm not switching but dowgrading my Lloyds account to a basic no fee Classic vantage paying interest. I just need to set up a £750 monthly rolling Standing order in and out of Nationwide.

Archergirl wrote: »

Innovate, I think you have to have £750 paid into the Flexaccount to get the Travel Insurance cover, plus direct debits (which you have)

No need for any DD's as you can open one without switching....

To be eligible for free FlexAccount Travel Cover

• Have been paying in a least £750 (excluding internal transfers) for the last 3 months
  OR
• Complete an account transfer to us (from a non Nationwide account) using our Account Transfer Service
• Eligibility is assessed upon account transfer completion or at month end if you have deposited £750 or more

http://www.nationwide.co.uk/current_account/travel/freetravelcover.htm

Archergirl

kar99, we were told there had to be direct debits coming out of the account as well, we have let them take them from our HSBC account then we will switch some back again!!