Northern Rock & Giant Space Rocks......

HAMISH_MCTAVISH

Generali wrote: »

I agree.

4.79% is probably a fairly impaired secured borrowing rate in the UK these days, even if your mortgage book is skewed towards the Northern Hell Hole.

If, on average, your borrowers aren't impaired then perhaps you're doing better than the kitchen sink represented.

Given 4.79% and relatively healthy loan performance stats (within the context of it supposedly being a 'bad bank' full of 'sub-prime slime' ) it'd be hard for them not to make a profit...

More than nine in 10 borrowers are up to date with their instalments and repossessions fell to 2,856, down from 5,046 a year earlier.

The number of borrowers more than three months behind on their repayments fell by 23 per cent to 11,976 last year.

http://www.thisismoney.co.uk/money/markets/article-3127261/Bad-bank-hits-profit-Lender-set-deal-wreckage-Northern-Rock-Bradford-Bingley-profitable-RBS-TSB-Virgin-Money-together.html#ixzz3rNi6pSzO

antrobus

wotsthat wrote: »

I bet never in a million years did you expect >85% of the assets would be 'good' so whatever dregs are left will be way below your initial expectations.

The pessimists dramatically underestimate the propensity of people to keep paying their mortgages.

Inevitably, the kind of judgements made in (say) 2009, when the world was about to end, and unemployment was supposed to soon reach 4 million, would differ from the kind of judgements made in (say) 2015, when the world seems to have survived, and unemployment is stubbornly falling.

The future is always uncertain.

HAMISH_MCTAVISH

antrobus wrote: »

Inevitably, the kind of judgements made in (say) 2009, when the world was about to end, and unemployment was supposed to soon reach 4 million, would differ from the kind of judgements made in (say) 2015, when the world seems to have survived, and unemployment is stubbornly falling.
.

Which is just a polite way of saying the judgements made in 2009 were wrong.

I maintain that the biggest mistake made in the UK during the crisis was allowing NR to fail, it should have been bailed out with unlimited liquidity support, and moral hazard be damned.

This was never a business in any jeopardy of insolvency due to the performance of it's loans...

The liquidity crisis could have been addressed and the bank used as a conduit to continue the provision of much needed credit into the UK housing market and wider economy.

Thrugelmir

wotsthat wrote: »

I bet never in a million years did you expect >85% of the assets would be 'good' so whatever dregs are left will be way below your initial expectations.

The pessimists dramatically underestimate the propensity of people to keep paying their mortgages.

Northern Rock had a different way of doing business to other mortgage lenders. The published Treasury report was damming at the time.

tincans6

Generali wrote: »

NRK were exceptionally low.

The real question for me, which I've never seen answered satisfactorily, is why Lloyds had to be nationalised.

Do you mean this ? Or do you mean why did Lloyds allow Gordon Brown / BoE to twist their arms to take over HBOS ?

I know in the end they were almost contemporaneous, but once in mid Sept 2008 Lloyds had agreed to take over HBOS (which at the time was larger than Lloyds), they had bought such a piece of crap that a bailout a couple of weeks later was inevitable - as the combined entity was short of both liquidity & capital.

Maybe if the board (Lloyds) had purely acted in their own shareholders interest (as they should do) they may have pulled out of the takeover.

When you pick up crap with a glove - the glove gets crappier but the crap doesn't get any glovier

I'd say the rescue of Northern Rock was a model of government intervention (not unlike Rolls Royce in 1971).

Lloyds taking over HBOS ? - not so good.

michaels

Lloyds being shot-gunned into wedding HBOS was the 'old orthodoxy' for dealing with a dodgy bank, you would simply force it into a merger with a strong rival who would take the short term pain of taking on the dodgy stuff for the long term gain of assets and customers much cheaper than a normal takeover would have cost (and without the monopolies issues).

But ti turned out we weren't in the old world anymore and actually even the 'good bank' was illiquid and the size of the old banks liabilities in a world where markets were closed was unquantifiable and hence the bailout quickly following the merger.

antrobus

HAMISH_MCTAVISH wrote: »

Which is just a polite way of saying the judgements made in 2009 were wrong.

I maintain that the biggest mistake made in the UK during the crisis was allowing NR to fail, it should have been bailed out with unlimited liquidity support, and moral hazard be damned....

But that's exactly what happened. NR was bailed out with unlimited liquidity support, and moral hazard was damned. NR carried on trading as such, until the good bank bit was sold to Virgin.

HAMISH_MCTAVISH wrote: »

...This was never a business in any jeopardy of insolvency due to the performance of it's loans...

The impairment losses that NR suffered in 2007-2009 were sufficent to wipe out its capital base. A bank that has insufficient capital either has to get some more capital from somewhere, or call in the liquidators.

It doesn't really matter whether or not the judgements reached in 2009 or whenever were correct (with the benefit of considerable hindsight) or not. It's not like we have any functioning time machines.

Besides, I expect that the most of the impairment losses recognised have actually been utilised to cover actual real cash losses that have since emerged from the stream of repos flowing from all that Together nonsense.

HAMISH_MCTAVISH wrote: »

...The liquidity crisis could have been addressed and the bank used as a conduit to continue the provision of much needed credit into the UK housing market and wider economy.

The liquidity crisis was addressed; the UK government lent NR a ton of money to keep it going. And there isn't exactly a shortage in the UK of available conduits for the provision of much needed credit for whatever purpose.

And if you were gonna pick a 'conduit', there are better conduits to pick than a smallish northern mortgage lender.:)

antrobus

Thrugelmir wrote: »

When dealing with thousands of individual debts and assets where do you start to quantify the likely outcome.

By putting data into a very big spreadsheet.:)

Graham_Devon

Tweet from Peston today

Robert Peston ✔ @Peston
Investors confidence in UK housing market is such that they pay premium for Rock mortgages. Some might say shows bubble is returning

HAMISH_MCTAVISH

Graham_Devon wrote: »

Tweet from Peston today

Alternatively, "some might say" the recovery is now complete and the next boom is only just getting started.