Northern Rock

[Bagpuss]

From the ToryGraph

Northern Rock's core tier one capital ratio - the key measure of financial strength - fell to 2.9pc, far worse than any rivals. Most banks now prefer to operate with a core tier one capital of 6pc or higher.

Capital was hit by rising bad debts, which more than trip-led in the half to £192m as house prices deteriorated and mortgage costs spiked. The number of repossessed properties jumped by 1,495 to 3,710 in just six months, some 70pc of which were bought with Northern Rock's controversial 125pc "Together" mortgage.


How exactly was it not the boards missmanagement?
Nationwide work on a tier one capital ratio of almost 10% and hence don't need to go to borrower of last resort to prop up the business.


Care to comment on the figures above CyberTory?

[Old Greg]

Don't feed the troll.

[Bagpuss]

I'm sure he has an answer for why the NR lent 3 times the ratio that the nationwide would.

[Moscow Mule]

I will.

You don't think the 2.9% was due in some part to the run on the bank?

Look at their latest half year results - http://companyinfo.northernrock.co.u...s_08.08.01.pdf

This is telling

Retail funding
• Net inflow of £3.7 billion in the first half of 2008
• Retail balances of £14.2 billion at 30 June 2008, compared with £10.5 billion at 31 December 2007 and
£24.4 billion at 30 June 2007

and this is interesting

Capital
Capital resources have been negatively impacted by the reported loss in the first half of the year with
regulatory core Tier 1 capital falling to £767.8 million at 30 June 2008 and total Tier 1 after deductions to
£1,355.1 million.
The reduction in the level of total Tier 1 resources also has an impact on the level of allowable Tier 2 and
innovative Tier 1 capital that can be included in capital resources. The combined effect of this is to exclude
£477.5 million from total allowable capital resources.
As a result of these factors the Tier 1 ratio at 30 June 2008 was 5.1% (31 December 2007: 7.7%) and the total
capital ratio 10.2% (31 December 2007: 14.4%).
The deterioration in market conditions will result in increased levels of credit losses, which will impact
negatively on capital resources. In addition, although as the balance sheet reduces capital requirements should
fall, this will in the short to medium term be offset by risk weighted assets increasing as a proportion of
exposures as credit quality deteriorates.
These factors have led to the requirement to strengthen the capital resources of the Company. This is to be
achieved by the conversion to Ordinary shares of the existing £400 million of Preference shares and up to £3
billion of the Bank of England loan following its planned novation to HM Treasury. Such conversion will be
finalised subject to State aid approval, and will significantly strengthen the Company’s capital position.
At the Company’s request, the FSA has agreed to waive the limits on use by the Company of Tier 2 capital.
This will mean that all available Tier 2 capital will be included within capital resources without restriction for
the purposes of meeting the Company’s minimum regulatory capital requirements on a temporary basis until
the recapitalisation of the Company following the obtainment of State aid approval or 31 December 2008
whichever is earlier

.

[Bagpuss]

Assets including 125% mortgages in a falling housing market

Hmm, Interesting reading on the Rock's demise..


there remain a number of
areas of concern. Most significantly, the deterioration in the housing market and the broader economic
environment, coupled with the evident stresses on household budgets as a result of rising food and fuel prices,
have put pressure on the Company’s loan books. Residential arrears over 3 months have more than doubled
since the start of the year to 1.18% at the end of June, and the higher LTV end of the book is particularly
exposed to housing market deterioration.

Whilst this increase is partly attributable to the Company tightening
the application of its arrears capitalisation policy and the shrinking of the mortgage book, the underlying trend
is all too evident. The impact is also being felt on possessions. The number of properties in possession grew
from 2,215 at the start of the year to 3,710 by the end of June.
As indicated in the Plan, the Company was expected to make a substantial loss in 2008. Actual performance in
the first six months of 2008 shows a statutory loss before tax of £585.4 million.

[Cyberman]

Basically, 14 Billion was wiped off deposits by HMG incompetence. Of course capital ratios were affected. That amount is what the Rock now owes the BofE. Says it all really!!

Thanks Gordon & Alastair !!

[TykeMerc]

I may have missed it, how much did you lose speculating on Northern Rock shares CyberTroll?

[Cyberman]

I may have missed it, how much did you lose speculating on Northern Rock shares CyberTroll?

Lost nothing yet!! The court cases start in January.


http://www.uksa.org.uk/NorthernRock.htm

[BrilloPad]

Assets including 125% mortgages in a falling housing market

They will recover - eventually.

The issue is - can the debt be serviced? And, even if it can be, will people just hand in the keys and walk away?

[Cyberman]

.... and the debt is now only 11.5 Billion, down BY 15.4 Billion in January, which is further proof that this is only a liquidity problem, and that the Rock should not have been nationalised. At this rate, the Rock will owe nothing by the end of next year.



http://www.citywire.co.uk/personal/-...=3953&ea=37608