Nationwide to Demutualise?

Generali

It's hard to see how else they can raise the £2,000,000,000 they apparently need to add to their capital reserves.

I blame Goldman Sachs and Moody's.

wotsthat

Is there a deadline that they need to meet?

They made the best part of a quarter of this amount to the year ending 2013 and, IMO, have set aside aside too much money to cover loan losses.

There was talk that they had sufficient cash to make some aquisitions.

http://www.guardian.co.uk/money/2013/may/22/nationwide-profits-leap-amid-speculation

antrobus

I blame the Basel Committee.:)

It's all about the new-fangled 3% leverage ratio. The problem that the Nationwide has, is that a lot of its assets are low risk-weighted mortgages, and in consequence, looks as if it needs to increase its core capital from £4.3 bn to £6.2 bn.

Bearing in mind that we've just been through the biggest banking crisis any of us are ever likely to see, and that the Nationwide has remained consistently profitable throughout, one has to wonder about the logic behind the rules that produce such a result.

Masomnia

Could be my generation's turn to get carpetbagging windfalls, might be worth opening an account.

Would be terrible publicity though, since their advertising is all centered around not being a bank. Not that members offered free shares would complain, mind.

wotsthat

Masomnia wrote: »

Could be my generation's turn to get carpetbagging windfalls, might be worth opening an account.

To protect themselves from carpetbaggers their T&C's say that the members will donate any windfalls to charity in the event of demutualisation.

Don't know if this is still the case or enforceable.

mysk_girl

I signed that clause. I'm sure it is enforceable, they will have made sure of that!

Masomnia

wotsthat wrote: »

To protect themselves from carpetbaggers their T&C's say that the members will donate any windfalls to charity in the event of demutualisation.

Don't know if this is still the case or enforceable.

Whaaaaaaaaaaat? Shan't bother now

wotsthat

Quite an interesting piece from Peston covering this...

http://www.bbc.co.uk/news/business-23137744

The Treasury and 10 Downing Street are concerned that the banks were ambushed in June by the regulator, the Prudential Regulation Authority, with the unexpected imposition of a new constraint on how much they can lend relative to their shock-absorbing capital, or what is known as a leverage ratio.

Now to be clear, it was the surprisingly early implementation of the leverage ratio, not the fact of it, that upset members of the government and Whitehall.

What is more, it is particularly unclear how the new capital requirement will be met by Nationwide without to an extent restricting the supply of new mortgages or at least pushing up the cost of mortgages - because, unlike Barclays, it is a mutual with few obviously spare assets to sell and no access to the stock market for capital.

Nationwide may be able to raise up to £2bn by selling "hybrid capital" to investors - or debt that behaves like shares - but this capital is pretty expensive, so issuing it would increase Nationwide's costs and restrict the building society's ability to provide cheap mortgages

As for Mr Carney, how can he defuse all this tension? Well he could set the deadline for the new leverage ratio as the end of 2014, rather than the end of this year.

Given that he has swanked about how Canada's banks survived the great crisis of 2008 in better shape than most others thanks to a leverage ratio less onerous than the Bank of England's new one, it would not be a great surprise if he opted for delay in Britain.

As usual the politics is more interesting than the numbers.

antrobus

Masomnia wrote: »

Whaaaaaaaaaaat? Shan't bother now

It's been the case since late 1997.

All new members since then have signed their windfall over to the Nationwide Foundation, a registered charity.

wotsthat wrote: »

Quite an interesting piece from Peston covering this...As usual the politics is more interesting than the numbers.

That's really the issue. The leverage ratio thing ain't a surprise, but I think Basel III doesn't even expect banks to publish what it is until 2015, with actual implementation expected for 2018. Apart from telling the world that the Nationwide's leverage ratio is only 2.1% I'm not sure the PRA has yet actually demanded anything from the Nationwide other than that they find the extra £400 million they say they need now. But sometime ....

I don't think the Nationwide is in trouble. (It ain't the Co-Op.) But obviously the Nationwide can't simultaneously pump out mortgages and pile up capital.

Mozette

Masomnia wrote: »

Could be my generation's turn to get carpetbagging windfalls, might be worth opening an account.

No surprise that's it's as greedy and short sighted as the previous.

Masomnia wrote: »

Would be terrible publicity though, since their advertising is all centered around not being a bank. Not that members offered free shares would complain, mind.

Well I bl00dy would! And I've been with them from well before the cut off date so I would get shares. Except I would move all my dealings away from them and to another Building Society.
The world does not need another bank.

SkyeKnight

wotsthat wrote: »

To protect themselves from carpetbaggers their T&C's say that the members will donate any windfalls to charity in the event of demutualisation.

Don't know if this is still the case or enforceable.

This rule was put in to stop members initiating a demutualisation - not the board. I guess if the people running Nationwide wanted to become a bank they would remove this condition. Anyway, it's been there such a long time (and now covers such a large number of members) that they would probably have to remove it before a vote otherwise they won't get the majority of members to agree.