Finance Matters

• 14Sep

  HSBC chief backs bank pay reform

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  From The BBC:

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  Stephen Green, Chairman of HSBC talks to Robert Peston
  Bankers’ pay needs to be reformed so they are no longer handsomely rewarded for deals that turn bad, the chairman of HSBC has warned.
  Chairman Stephen Green told the BBC that the banking industry was too focused on short-term profits.
  He said that current pay schemes did not reflect long-term performance.
  He indicated remuneration was one of the causes of the credit crunch as some staff were paid too much for deals that ended up costing their banks a fortune.
  Banks worldwide have lost around 0bn (£170bn) from investments related to the sub-prime mortgage crisis.
  Initially these bets on the sub-prime market, which lends to those with poor or patchy credit histories, were very profitable for banks as house prices rose and borrowers repaid their loans.
  However, the market for mortgage-based securities turned sour last summer as defaults rose and the value of thes…

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• 14Sep

  Fuel bills deal being finalised

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  From The BBC:

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  Gordon Brown on the British economy
  Ministers are putting the finishing touches to a fuel poverty package – but without the windfall tax on energy companies demanded by the unions.
  More than 10 million households are expected to be offered help to cut bills through loft insulation, double glazing and other measures.
  Customers will also get help in finding the best gas and electricity tariffs.
  Earlier Gordon Brown said the government would do “everything that we can” to help people with energy bills.
  The government is due to unveil a package of measures to help people with rising electricity and gas prices on Thursday. It says they will be a more long-term solution to cutting bills than one-off payments.
  Energy-saving measures in the home
  Asked about the package at a press conference with Italian PM Silvio Berlusconi, Mr Brown said: “We’re doing everything that we can.
  “For example with the winter allowance for pensio…

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• 14Sep

  Home sales at lowest for 30 years

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  From The BBC:

  The slump in the UK property market continued in August, with some estate agents selling fewer than one home per week in the past three months.
  The Royal Institution of Chartered Surveyors (Rics) said sales were at their lowest level since its monthly survey started in 1978.
  It said the fall in prices slowed, for the fourth month in a row, but they were still much lower than a year ago.
  Rics said the continued shortage of mortgage funds was “stifling” buyers.
  Mortgage famine
  “A lack of mortgage liquidity is the key issue which is keeping the housing market from showing any real sign of recovery,” said Rics spokesperson Jeremy Leaf.

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  Robert Peston interviews Graham Beale of Nationwide on house prices
  “While money is scarce, many will continue to be denied the next step on the property ladder.
  “The Government’s stamp duty policy will not be enough kick start transactions,” he warned.
  Meanwhile, the head of the Nationw…

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• 14Sep

  PPI still mis-sold, says Which?

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  From The BBC:

  Many people are still being misled into buying payment protection insurance (PPI) to cover their credit card payments, Which? claims.
  A survey for the consumers’ association suggests that nearly 10 million people have a PPI policy with their cards.
  But 13% – 1.3 million – bought it under the mistaken belief it was compulsory or would improve their chances of having their card application approved.
  Which? said people were wasting their money buying any form of PPI policy.
  “Credit card PPI is a modern day snake oil – it’s a useless product, expensive and poorly designed,” said Doug Taylor of Which?
  “In this time of economic uncertainty, people are effectively throwing away £970 million each year, when they should be encouraged to seek independent financial advice about protecting their finances as a whole,” he added.
  This was rejected by the British Bankers Association (BBA), who said the insurance was a valuable “plan B”.
  “Taking out PPI is not a condition for agreeing to provid…

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• 14Sep

  Wet weather hits UK retail sales

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  From The BBC:

  Retailers face their worst conditions in three years with sales falling in five of the last six months, the British Retail Consortium (BRC) warns.
  Like-for-like sales in August were 1% lower than a year before, the BRC said.
  Damp weather followed the failure of retailers in July to attract shoppers through the use of heavy discounts.
  Food and drink was the only sector to show significant sales growth, despite the chilly weather hitting salad and barbecue products.
  Food retailers reported higher sales of cheaper meat products such as mince and stewing meats.
  Heavy discounts
  In a bid to attract consumers who have been tightening belts in the face of rising inflation there was heavy discounting across both clothing and footwear stores over the month.
  Sales of DIY and gardening equipment slowed, while “big-ticket” furniture sales showed year-on-year falls for the seventh month in a row.
  Between June and August, like-for-like sales were 0.8% lower than the same three-month period a…

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• 14Sep

  Nationwide rescues small lenders

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  From The BBC:

  Two UK mortgage lenders have had to be rescued by the Nationwide Building Society after running into financial difficulties.
  The Nationwide will take ownership of smaller rivals the Derbyshire and Cheshire Building Societies with the approval of financial regulators.
  Members of the two firms will not get any bonus payments.
  Smaller lenders are under increasing strain due to the credit squeeze and rising mortgage defaults.
  Adrian Coles, director-general of the Building Societies Association (BSA), welcomed the rescue by the Nationwide, but said that the problems were not reflected in the wider sector.
  “Overall, the building society sector is coping well with the current difficult conditions in the housing market,” he said.

  “I’m very confident there are no other building societies in a similar position currently to that of the Derbyshire and the Cheshire.”
  Job losses
  The deals are expected to be completed by the end of the year subject to approval by the Financial Services Autho…

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• 14Sep

  One in four ‘facing fuel poverty’

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  From The BBC:

  Almost a quarter of the population will be pushed into fuel poverty by the end of next year, a report has suggested.
  By the end of 2009, 5.7 million UK households will be spending at least 10% of their income on energy bills, the National Housing Federation said.
  Average household electricity bills are expected to increase to more than £500 per year by 2010, and gas bills to around £900.
  The government said it was doing a great deal to help reduce fuel bills.
  The National Housing Federation research, entitled Energy Prices and Debt, said low income households would be worst hit by increases to pre-payment schemes.
  The number of families in fuel poverty – defined as when more than 10% of household income is spent on fuel bills – has increased by 100% since 2005.

  Around 5.7 million people will spend 10% of their annual income on energy bills by 2009, compared with around 3.8 million in 2007 and 2.4 million in 2005, the report said.
  The average energy bill is set to climb to £1…

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• 14Sep

  Pension fund finances get worse

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  From The BBC:

  Pension fund finances worsened in August, with the collective deficit of the UK’s final salary pension schemes widening to £36.7bn.
  That was up from the deficit of £24.1bn at the end of July and far worse than the situation a year ago when schemes had a surplus of £59.1bn.
  The figures from the Pension Protection Fund (PPF) cover nearly 7,800 schemes, mainly in the private sector.
  The PPF said the cost of funding pensions had continued to rise.
  Liabilities
  The assets of all the schemes measured by the PPF – including shares, bonds, cash and property – actually rose by 4.2% during August.
  But the reason for the schemes’ total deficit swelling was that the value of their liabilities rose by an even greater percentage.
  Under the accounting method used by the PPF, the value of liabilities actually needed to provide the pensions, now and in the future, rose by 5.6% in August alone.
  “During the month of August 2008 there was a 3.5% increase in assets due to rising UK and global eq…

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• 14Sep

  House prices ‘to reduce by 25%’

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  From The BBC:

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  Graham Beale’s forecast for the housing market

  The chief executive of the Nationwide Building Society has told BBC News that he thinks house prices could fall as much as 25% from their peak.
  This prediction implies that 2.5 million homeowners could be pushed into negative equity.
  Graham Beale also said he does not expect to see signs of recovery in the housing market until 2010.
  Nationwide is by far the UK’s biggest building society and is closer to the housing market than many others.
  Over the course of the business cycle it provides slightly fewer than one in ten of all the mortgages in the UK – though its recent share of new home loans has been a bit less.
  So Nationwide’s chief executive, Graham Beale, carries weight when prognosticating.
  What he said in an exclusive BBC interview on Monday is that he does not expect the housing market to show signs of recovery till 2010.
  “I think we are into 2010 [before we see…

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• 14Sep

  Dead Cat bounce or a sign of better times ahead?

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  From The Telegraph:

  At the start of the week there was finally some good news for stock market investors, when the US Government announced the all-but nationalisation of mortgage finance companies Fannie Mae and Freddie Mac.
  For those who want to embrace risk and possibly benefit from this rally, Gilligan suggests buying an exchange traded fund such as the DB X-Trackers DJ Stoxx 600 Banks, run by Deutsche Bank.
  Not everyone is optimistic that the market rally is a sign of better things ahead. Andy Parsons, Advice and Fund Team Manager at the Share Centre, said the market “is going to be rough for some time”.
  When asked what fund he would choose in the current market, he replied ‘cash’. “It is hard to see an upside at the moment, and quite easy to see a downside” he said….

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