London Scottish Bank in crisis debt talks

[Alf W]

London Scottish tend to lend to the non-property owning, low paid / unemployed market so economic downturn should put more people into its target lending market. Also, half of their business is collecting debts on behalf of credit card companies and utilities therefore should be more business on the way.

They have just had a new Chief Exec so this sounds like him painting the worst possible picture he can as his starting point.

Could be worth a punt.

[d000hg]

Hadn't anyone heard of Northern Rock? I had... but then I live near Newcastle so I'm not sure if only locals knew it existed before this summer.

[AtW]

I will be worried when some of the big boys start making losses.

Big boys cover up losses better.

[BrilloPad]

never heard of them - they are not even based in LOndon FFS.

boomed!

[Ardesco]

I will be worried when some of the big boys start making losses. Lets face it, who has ever heard of this bank before today? A business based around people with a tulip credit record is never going to be a particulary secure one. If they had hit these probelms at any other time nobody would even have bothered mentioning it.

I am getting far too cynical about the media in my old age i guess. Yes global economy isn't looking wonderful atm, but some tulipty little bank nobody has ever heard of making a loss is hardly proof that the global economy is going to collapse tomorrow.

[threaded]

Yes, when the debt collectors start to feel the pinch, I'd be worried.

[AtW]

London Scottish Bank in crisis debt talks
UK sub-prime lender warns of losses and unpaid dividends as banking watchdog orders it to increase funding

Shares of London Scottish Bank (LSB) plunged almost 20 per cent in early morning trading after the small finance house and debt collector issued a profit and dividend warning. By mid-morning, the shares were down 17.86 per cent at 62.98p

The group said it was in discussions with the Financial Services Authority over its capital base, that it would falll into loss this year and may be unable to pay the final dividend.

It said some low-income customers had been unable to repay loans and it would have to add a further £22 million to cover bad debts in the year ending October 31.

Discussions with the FSA will begin this week on how to address the shortfall of regulatory capital, which will stand at £13 million as of January 1.
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The customer arrears means the lender is no longer holding the required amount of regulatory capital under new international banking rules due to come into effect in the new year.

LSB now expects a pre-tax loss of about £4 million to £5 million for the year. Analysts were looking for underlying profits of about £17 million. That loss could swell to over £17 million if an interim one-off charge, relating to the company's broking arm, is also taken into account.

In a statement, LSB said it believed the bank continued to have strong balance sheet and was in compliance with all the convenants in its banking agreements.

The group said: "However until the company has remedied the shortfall....it may have to restrict new lending volumes and may be unable to pay a final dividend in respect of the year ended 31 October 2007."

LSB said it had been told by the City watchdog, the FSA, to adopt an interim Individual Capital Guidance (ICG) from January 1 2008, which will require it to hold more regulatory capital than needed under new Basel II laws until the FSA has set a formal limit.

The business offers loans to customers in the C, D and E socio-economic bands, which is equivalent to the sub-prime lending market in America whose failure to repay mortgages led to this summer's financial crisis.

LSB's troubles are one of the first indicators of potentially much deeper problems in Britain's own sub-prime sector, as low income customers get hit by rising interest rates and utility bills.

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Doomed!