The UK's Q4 2023 banking crisis.

[wherebee]

5 hours ago, HousePriceMania said:

Again, without a members vote.

Something is going on.

never used to be members votes when emergency takeovers of small BS by big BS happened.  

Emergency takeover requested by BOE?

[sancho panza]

this is an interesting article which blames poor share price perfrmance for UK banks on UK govt-of course-,UK economy,regulatory issues-needing solid capital ratios (heaven forbid),markets not seeing the value(Bailey's theory)

'Barclays actually trades at a 50pc discount to the book value of its assets.'

the otehr thesis might be that actually the marekts are valuing them jsut right and that their loan books are hiding losses through forebearance and an over reliance on easy moentary policy.

https://uk.yahoo.com/news/british-banking-become-stagnant-backwater-093000644.html

British banking has become a stagnant backwater – and it’s painfully obvious why

Deals are suddenly back in vogue and “consolidation” is the word on everyone’s lips. Nationwide Building Society is paying £2.9bn to buy Virgin Money – thereby increasing in size by about a third. Coventry, the second biggest building society in the country, is planning to buy the Co-op from its hedge fund owners for £780m.

Excuse me while I stifle a yawn.

A bit of M&A action will no doubt make a welcome change for those advisers whose thumbs must have become over-muscled from so much twiddling. But anyone tempted to suggest these deals indicate animal spirits are returning to the City is barking up the wrong tree.

In reality, this all, like the recent something-and-nothing strategy overhaul from Barclays, amounts to so much displacement activity. It highlights the extent to which the industry is bogged down, devoid of fresh thinking and stymied by negative investor perceptions of the UK economy.

The defining characteristic of UK banks is that they are massively undervalued compared to their international peers, a fact that Andrew Bailey pointed out in a speech in February and which he described as “puzzling”.

The Governor’s intervention came soon after Jeremy Hunt had called bank chiefs into No 11 for a chat about why their share prices were doing so badly.

Oh, to have been a fly on the wall at that meeting. If the bankers were being honest, their list of reasons would surely have included the Governor of the Bank of England and the Chancellor of the Exchequer. To understand why, we need a little context.

The share prices of UK banks fell off a cliff in April 2007 and have basically just bumped along the seafloor ever since. This is sometimes blamed on enduring memories of the financial crisis and regulatory demands to hold more capital. But both these factors are just as true of international banks as they are of British ones.

The bulk of bank regulations are set globally. Watchdogs around the world are currently in the process of implementing the last leg of the post-financial crisis capital reforms known as Basel 3.1.

Sure, it’s taken a while, but the new regime can broadly be considered a success given the ease with which most big banks navigated the economic turbulence of the last four years.

Never the less, something is amiss in the UK. As Bailey pointed out in his February speech, the average price to tangible book ratio for the major UK banks in the two years before Northern Rock imploded in 2007 was 3.4. That figure is now 0.7. In other words, the market believes UK lenders are worth less than the sum of their parts.

Barclays actually trades at a 50pc discount to the book value of its assets. This is one of the worst valuations of a large bank in the Western world. NatWest, Lloyds and HSBC are faring a little better but not much.

Normally such deep discounts would suggest investors are worried there are nasties lurking on balance sheets. That’s not the case here.

“The paradox is starkly apparent – a period when banks were valued by markets at more than 300pc of tangible book value ended in disaster,” said Bailey. “Today’s greater stability looks the better place to be, but not for market valuations. That leaves us with the puzzle.”

Yeah, I’m not sure it’s that much of a head-scratcher.

When all is said and done, investors who take a stake in a bank are really placing a bet on the economy or economies in which those lenders operate.

Shareholders in UK banks have been hit with additional levies on top of normal corporate taxation since 2011 and the Bank of England’s decision to ban lenders from paying dividends during the pandemic.

Add to that the political chaos of recent years – culminating in Liz Truss’s cluster-Budget – together with the lack of any credible plan to stimulate strong economic growth since, and it becomes clear that the main issue with UK banks is not the “banks” bit but rather the “UK” part.

Of course, HSBC, which generates two-thirds of its profits in Asia, is a partial exception, although exposure to China is clearly a mixed blessing at the moment. Many analysts believe that the latest Barclays rejig will result in the bank becoming even more focused on the UK. Yay!

And the real problem with their low valuations is that it isn’t much of a problem. Many bargain-basement UK companies are currently being snapped up by foreign buyers, but there’s no way regulators will allow that to happen to banks. Nor will they let the big four acquire each other, as this would reduce competition yet further.

Meanwhile, the sheer volume of post-crisis rules, although necessary, has made the regulatory moat around the bigger firms even wider and deeper.

Despite being the largest challenger bank in the UK, Virgin Money’s cost of equity was in the low teens, while its return on equity struggled to escape single digits, meaning it was burning through shareholder value. No wonder its owners are tapping out.

The UK banking industry has come to resemble a stagnant pond. Now and then a sprat will swallow a minnow; flashy fintechs might create a bit of a buzz. But the ecosystem is low on the oxygen of real competition. UK banks are safer now. However, they are medium-sized fish sluggishly drifting through a shrinking backwater.

[sancho panza]

US CRE is looking like the proverbial canary.The losses are considerable in per centage terms but manageable by volume ...for now..

as weve seen before ,these loans are disporportionately held by smaller US bnaks and also CMBS investors.

The issue isnt so mucht eh CMBS losses but rather the fact that it will put said investors off buying CRE ecposure again which will only reinforce the down ward price spiral.

CRE owners now becoming retialiers to try and keep the laons repayments flowing

https://wolfstreet.com/2024/04/22/brick-and-mortar-meltdown-fells-express-simon-property-brookfield-to-avert-more-vacant-stores-and-bad-leases-at-their-malls-buy-brands-and-435-stores-out-of-bankruptcy/

Express Inc, once a high-flying fashion retailer for the younger crowd with 542 stores in the US, and with three brands – Express, UpWest, and Bonobos – finally filed for pre-packaged Chapter 11 bankruptcy today.

Since its heyday in 2016, the company has already closed 114 stores. The store count had peaked in the fiscal year ended January 2017 at 656 stores. Now it will close another 95 Express stores and all its 12 UpWest stores, bringing the store count to about 435 stores.

Mall landlords have a lot at stake, they’re the biggest creditors: In its last quarterly 10-Q filing with the SEC, Express reported lease liabilities of $625 million – far larger than its outright debt of $271 million. Lease liabilities made up nearly half of its total liabilities of $1.32 billion.

So… a consortium, including the two largest mall landlords – Simon Property Group and Brookfield in whose malls many of the surviving stores are – have worked out a “non-binding” deal with Express and its debt-holders to buy the brands, the surviving 435 stores, and the retail operations out of bankruptcy.

For Simon Property and Brookfield, it’s another desperate effort to keep stores at their malls open to keep their malls alive. Among the other brands and stores they’d bought out of bankruptcy was J.C. Penney, which anchors many of their malls. As goes the anchor, so goes the mall.

 

 

https://wolfstreet.com/2024/04/24/how-itll-take-years-to-clean-up-the-office-cre-mess-with-losses-spread-far-and-wide/

How It’ll Take Years to Clean Up the Office CRE Mess, with Losses Spread Far and Wide

Two Years Ago, in March 2022, Blackstone indicated that it would no longer make the interest payments on the fixed-rate interest-only $308 million mortgage on a Manhattan office tower it had bought in 2014 for $605 million. The 26-story tower at 1740 Broadway was built in 1950 as the iconic headquarter of Mutual Life Insurance Co., which vacated the building in 2006. The building was then renovated and leased.

In 2015, Blackstone had obtained the $308 million mortgage from Deutsche Bank, which then securitized the mortgage into a single-asset commercial mortgage-backed security (BWAY 2015-1740) and then sold these CMBS to investors.

So after the $308 million in cash it had obtained from the mortgage in 2015, Blackstone had $297 million left in the tower.

Now there’s part two.

So now, two years later, after a number of complications, including a change in special servicer, the CMBS, backed by the $308 million mortgage, was purchased for “just under $200 million” by private equity firm Yellowstone Real Estate, according to the Commercial Observer, citing sources familiar with the trade. Yellowstone Real Estate was previously owned by, uhm, Blackstone, the Commercial Observer said.

[spygirl]

Canary Wharf offices lose £900mn of value

Docklands financial estate secures backing from lenders for £550mn debt deal against backdrop of falling valuations

https://www.ft.com/content/a81bfb7f-8f34-4cf9-94b6-3519db8ef5d9

Theyve missed out - So far'

I dont see anyone really want to setup in CW.

London empty office space is getting to nuts levels.

 

 

[spygirl]

More than £900mn has been wiped off the value of Canary Wharf Group’s office buildings, as the financial district landlord secured backing from lenders for a £553mn debt deal.

The developer and manager of the London docklands estate — owned by Brookfield and the Qatar Investment Authority — on Thursday reported a 14.7 per cent annual fall in the value of its property holdings to £6.8bn in 2023.

[sancho panza]

mentioned in main thread iirc.small bank $6bn in TA.Likely CRE I would suspect but we'll see whats comes out

https://www.businesstoday.in/world/us/story/us-regulators-seize-sell-philadelphia-based-bank-first-us-bank-failure-of-this-year-427166-2024-04-27

[PatronizingGit]

On 23/04/2024 at 17:40, sancho panza said:

this is an interesting article which blames poor share price perfrmance for UK banks on UK govt-of course-,UK economy,regulatory issues-needing solid capital ratios (heaven forbid),markets not seeing the value(Bailey's theory)

'Barclays actually trades at a 50pc discount to the book value of its assets.'

the otehr thesis might be that actually the marekts are valuing them jsut right and that their loan books are hiding losses through forebearance and an over reliance on easy moentary policy.

https://uk.yahoo.com/news/british-banking-become-stagnant-backwater-093000644.html

British banking has become a stagnant backwater – and it’s painfully obvious why

Deals are suddenly back in vogue and “consolidation” is the word on everyone’s lips. Nationwide Building Society is paying £2.9bn to buy Virgin Money – thereby increasing in size by about a third. Coventry, the second biggest building society in the country, is planning to buy the Co-op from its hedge fund owners for £780m.

Excuse me while I stifle a yawn.

A bit of M&A action will no doubt make a welcome change for those advisers whose thumbs must have become over-muscled from so much twiddling. But anyone tempted to suggest these deals indicate animal spirits are returning to the City is barking up the wrong tree.

In reality, this all, like the recent something-and-nothing strategy overhaul from Barclays, amounts to so much displacement activity. It highlights the extent to which the industry is bogged down, devoid of fresh thinking and stymied by negative investor perceptions of the UK economy.

The defining characteristic of UK banks is that they are massively undervalued compared to their international peers, a fact that Andrew Bailey pointed out in a speech in February and which he described as “puzzling”.

The Governor’s intervention came soon after Jeremy Hunt had called bank chiefs into No 11 for a chat about why their share prices were doing so badly.

Oh, to have been a fly on the wall at that meeting. If the bankers were being honest, their list of reasons would surely have included the Governor of the Bank of England and the Chancellor of the Exchequer. To understand why, we need a little context.

The share prices of UK banks fell off a cliff in April 2007 and have basically just bumped along the seafloor ever since. This is sometimes blamed on enduring memories of the financial crisis and regulatory demands to hold more capital. But both these factors are just as true of international banks as they are of British ones.

The bulk of bank regulations are set globally. Watchdogs around the world are currently in the process of implementing the last leg of the post-financial crisis capital reforms known as Basel 3.1.

Sure, it’s taken a while, but the new regime can broadly be considered a success given the ease with which most big banks navigated the economic turbulence of the last four years.

Never the less, something is amiss in the UK. As Bailey pointed out in his February speech, the average price to tangible book ratio for the major UK banks in the two years before Northern Rock imploded in 2007 was 3.4. That figure is now 0.7. In other words, the market believes UK lenders are worth less than the sum of their parts.

Barclays actually trades at a 50pc discount to the book value of its assets. This is one of the worst valuations of a large bank in the Western world. NatWest, Lloyds and HSBC are faring a little better but not much.

Normally such deep discounts would suggest investors are worried there are nasties lurking on balance sheets. That’s not the case here.

“The paradox is starkly apparent – a period when banks were valued by markets at more than 300pc of tangible book value ended in disaster,” said Bailey. “Today’s greater stability looks the better place to be, but not for market valuations. That leaves us with the puzzle.”

Yeah, I’m not sure it’s that much of a head-scratcher.

When all is said and done, investors who take a stake in a bank are really placing a bet on the economy or economies in which those lenders operate.

Shareholders in UK banks have been hit with additional levies on top of normal corporate taxation since 2011 and the Bank of England’s decision to ban lenders from paying dividends during the pandemic.

Add to that the political chaos of recent years – culminating in Liz Truss’s cluster-Budget – together with the lack of any credible plan to stimulate strong economic growth since, and it becomes clear that the main issue with UK banks is not the “banks” bit but rather the “UK” part.

Of course, HSBC, which generates two-thirds of its profits in Asia, is a partial exception, although exposure to China is clearly a mixed blessing at the moment. Many analysts believe that the latest Barclays rejig will result in the bank becoming even more focused on the UK. Yay!

And the real problem with their low valuations is that it isn’t much of a problem. Many bargain-basement UK companies are currently being snapped up by foreign buyers, but there’s no way regulators will allow that to happen to banks. Nor will they let the big four acquire each other, as this would reduce competition yet further.

Meanwhile, the sheer volume of post-crisis rules, although necessary, has made the regulatory moat around the bigger firms even wider and deeper.

Despite being the largest challenger bank in the UK, Virgin Money’s cost of equity was in the low teens, while its return on equity struggled to escape single digits, meaning it was burning through shareholder value. No wonder its owners are tapping out.

The UK banking industry has come to resemble a stagnant pond. Now and then a sprat will swallow a minnow; flashy fintechs might create a bit of a buzz. But the ecosystem is low on the oxygen of real competition. UK banks are safer now. However, they are medium-sized fish sluggishly drifting through a shrinking backwater.

They never dare mention that banks were perhaps massively overvalued in 2007 & that given we have been attempting to prop up a lowering rate supercycle for the last 15 years, our options running out, the only way is down. 

Or rather the only way should be down. Im sure they will sacrifice whatever else is left to prop up their mates in the city.

[PatronizingGit]

On 25/04/2024 at 15:52, spygirl said:

Canary Wharf offices lose £900mn of value

Docklands financial estate secures backing from lenders for £550mn debt deal against backdrop of falling valuations

https://www.ft.com/content/a81bfb7f-8f34-4cf9-94b6-3519db8ef5d9

Theyve missed out - So far'

I dont see anyone really want to setup in CW.

London empty office space is getting to nuts levels.

 

 

If it cant be repurporsed for new swarthy peasants, who pays for the demolition of this monumental eyesore locality? Us, i suppose?!

[HousePriceMania]

@sancho panza Just saw this pop up....

 

Someone seems confident that HSBC are fooked.

 

 

Edited Tuesday at 09:07 by HousePriceMania