Santander's Market Dominance

Santander, the Spanish banking group that owns Abbey, Alliance & Leicester and Bradford & Bingley, has announced a 58% rise in Sterling profits for the first 9 months of this year to £1.2BN.

Abbey's gross lending of £19BN represented 20.5% of the UK market, although it is 37% less than last year.

Santander is the eurozone's largest bank by market capitalisation.

However, Bradford & Bingley is going to split its good and bad assets (its balance sheet being £50BN), and sell the good assets to private buyers, in order to pay off its £18.4BN loan early.

The question is, what exactly is a "good" asset and what is a "bad" asset?

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Named and Shamed

The Financial Ombudsman Service (FOS) has finally had the guts to name and shame the worst offending financial services companies in the UK, being those companies that have logged the highest number of customer complaints.

Congratulations to the five major high street banks, which account for the majority of the complaints.

The big five have managed to notch up a staggering 38,286 complaints, out of a total of nearly 70,000 received by the ombudsman in the six months to 30 June 2009.

- Lloyds (which includes HBOS) came top to the league of shame with 15,233 complaints.

- The Royal Bank of Scotland group scored 5,533 of the complaints received by the ombudsman.

- Barclays scored 8,283.

- Abbey scored 2,493 complaints.

- HSBC group scored 2,363 complaints.

- Alliance & Leicester scored 1,786.

The chairman of the FOS, Sir Christopher Kelly, was more than unimpressed. He is quoted:

"I will now be writing to the chairmen of the financial businesses that generate the largest proportion of our complaints workload, to ask them to consider very carefully both their own complaints performance – as reflected in the data we are publishing today – and the complaints performance of their competitors."

As I have noted many times before, the financial services sector in the UK treats its customers appallingly.

Why does it use the word "services" in its moniker, given that "service" is the one thing that it doesn't provide?

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Famous Names Scrapped

Abbey, Alliance & Leicester (A&L) and Bradford & Bingley are to be scrapped; or at least their names are to be consigned to the dustbin of history.

Santander, the Spanish banking group that owns all three brands, has announced that it will re brand them under the "flame-logo" and Santander name by the end of 2010.

Given that the above names currently exist and function side by side in many highstreets, it is fair to assume that once the re branding has occurred the next step will be staff cuts and office closures.

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Back on Track

Three mainstream mortgage lenders have relaunched their tracker mortgages, since last week's mass exodus following the 1.5% cut in interest rates.

- Abbey has introduced a two year tracker at 4.99% (1.99% above base, being 0.7% higher above base than its previous tracker)

- Lloyds TSB has introduced a tracker at 4.79% (1.99% above base, being 0.7% higher above base than its previous tracker)

- Alliance & Leicester has introduced a new tracker at 4.89% with a 1% fee.

Strange that they increase their margins, when the rates are falling. However, borrowers should be grateful for small mercies that they are at least offering trackers.

Meanwhile a survey of more than 200 cards by Defaqto, a banking research group, found that the cost of borrowing on credit cards rose to 17.6% cent and rates on store cards rose to 25%, with some companies increasing rates by up to 10% overnight.

How strange!

Surely the credit card companies are not trying to profiteer from this crisis?

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Banks Speed Up - Sort Of

A rare piece of good news for bank customers whereby the banks, whose reputation has sunk to an all time low, have actually started to do something the benefits their long suffering customers.

A banking scheme for one-day cash transfers over the phone or on the internet has started.

This is designed to speed up the process of transfers, which previously took up to four days.

Can you guess what happened to the money being transferred during this four day period?

It earned the banks a very nice £30M in interest per annum.

How nice for them!

Under the new scheme customers will be able to make one-off payments, up to a maximum value of £10K, over the telephone or via the internet. These payments will leave their account and arrive at the destination account on the same day.

The 13 banks included in the scheme are: Abbey, Alliance and Leicester, Barclays, Citi, Clydesdale and Yorkshire Banks (National Australia Group), Co-operative Bank, HBOS, HSBC, Lloyds TSB, Nationwide Building Society, Northern Bank (Danske Bank), Northern Rock, and Royal Bank of Scotland Group (including NatWest and Ulster Bank).

I wonder what the catch is?

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The FSA's Light Touch

The BBC's Panorama programme last night exposed the precarious foundations of Britain's housing price bubble and credit boom, as it highlighted a number of "criminally" negligent cases of mortgages being provided to people who had no hope of ever affording them.

One such case being that of Emmanuel Blango, a psychiatric nurse who earns around £25K per annum. He was awarded a a sub-prime mortgage from the Alliance and Leicester for £300K, and another mortgage for £200K from Platform which is part of the Britannia Building Society.

Unsurprisingly Mr Blango is having trouble paying the interest, and has had his second flat repossessed.

Panorama noted that around 70% of the 7000 repossessions over the last 3 months are down to sub prime lending.

The reasons for this boom in "risky" (for want of a better word) lending are as follows:

• The commissions earned by the mortgage salesmen, who target the financially naive, are distorting their "ethical" principles when they advise their clients.



• The lax checks performed by banks and building societies on mortgage applications.



• The bundling of the debt by City institutions for immediate resale, thus paying off the first lender and eliminating the original lender's risk.



• The light touch of the FSA in regulating the market and enforcing its rules.

The extent of sub prime mis-selling is reminiscent of the endowment scandal of the 1980's.

It is regrettable that despite the lessons that the FSA should have learned over the endowment mis-selling scandal, it appears not to have taken them on board in its regulation of the sub prime mortgage market.

The UK faces the very real threat of a housing price collapse, and economic chaos, as the number of defaulting sub prime mortgages increases.

Why has the FSA allowed this to happen?

Clearly the FSA, in its current form, is not fit for purpose.

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Northern Rock

Bloomberg notes the following:

"The cost of overnight borrowing in pounds rose the most since June as the bailout of U.K. lender Northern Rock Plc stoked concern other home-loan providers will be forced to seek emergency funding.

The overnight rate banks charge to lend pounds soared 60 basis points to 6.47 percent today, the highest in more than a month, according to the British Bankers' Association. The three- month rate fell 7 basis points to 6.75 percent, the BBA said."

Northern Rock's share price is currently down 34% on the day.

The time has come for the Bank of England to:

1 Lower interest rates

2 Knock some heads together in the City, and ensure that the self imposed moratorium by banks on interbank lending is lifted

Should the Bank of England fail to loosen interbank liquidity, other banks will start to wobble. Bloomberg notes that Bradford & Bingley Plc and Alliance & Leicester Plc also rely more on financial markets than customer deposits to fund mortgages.

It is time for the Bank of England to get off the fence.

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Banks' Behaviour Unacceptable

The Information Commissioner has publicly accused banks, that have left customer details in the street, of an 'unacceptable' breach of the Data Protection Act.

It seems that the ever popular banks, who provide their customers with such "value for money", have been leaving customer account details in waste bins, skips and bin bags outside 11 branches across the country.

Needless to say this exposes the hapless customer to identity theft and fraud.

Deputy Information Commissioner David Smith said:

"It is unacceptable for banks and other organisations to carelessly discard their customers.

It is vital that banks and other organisations take security seriously. If they do not, they not only risk further action from the Information Commissioner but also risk losing the trust of their customers.

Individuals must feel confident that banks and other organisations are safeguarding their personal information."

The 11 financial institutions that have been named and shamed are:

-Halifax-Bank of Scotland
-Barclays
-Alliance & Leicester
-Royal Bank of Scotland
-NatWest
-Nationwide Building Society
-Co-operative Bank
-HFC Bank
-Clydesdale Bank
-Scarborough Building Society
-United National Bank

Also on the list were the Post Office and the Immigration Advisory Service.

The information publicly discarded by the banks included; names, addresses and bank account numbers.

Nigel Evans MP, chairman of the All Party Parliamentary Group on Identity Fraud, demanded heavy fines for the organisations involved.

Quote:

"It is absolutely unforgivable that these financial institutions have acted so irresponsibly.

They seem to have ignored warnings about the need to keep customer details secure. Quite frankly, I am amazed that this is still going on. It is well known that criminals actively target bins in search of this sort of detail. This behaviour shows a cavalier disregard towards the protection of customers."

The Information Commissioner's Office has asked the banks and other organisations to sign a formal undertaking to abide by the Data Protection Act in future. If they fail to do so, they would face action leading to prosecution and fines.

The British Bankers' Association said:

"Banks take their responsibilities for protecting customers' personal information very seriously and each bank has secure arrangements for disposing of confidential customer information.

The banks concerned have fully investigated the circumstances and taken appropriate steps to ensure that any weak links in their security practices have been addressed."

The statement by the Bankers' Association is of course contradictory, what is the point of having secure arrangements if they are not followed?

Pretty pathetic really, it hardly leads one to conclude that the high fees that banks charge for their "services" are justified.

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FSA Calls For MEAF Refunds

The Financial Services Authority (FSA) has called for lenders to justify, and refund, their increased mortgage exit administration fees (MEAF's).

MEAF's are charged by lenders when borrowers pay off their mortgage early, or switch to another lender. The theory is that the MEAF covers the administration costs of closing the mortgage early. However, the FSA and others are becoming increasingly suspicious of the recent MEAF increases being foisted on mortgage holders by some lenders.

The FSA stated that, with regards to current customers, lenders must decide by February 28th 2007, whether they will charge no MEAF, the original or revised lower MEAF or their current increased MEAF.

Those that decide to charge the latter will be required to justify their decision.

The FSA also stated that past customers, who are unhappy with their MEAF charges, must be treated in the same way as current customers. Those who complain about an increased MEAF, should expect a refund of the difference between the actual MEAF paid on exit and the original MEAF.

"This is Money" claims that some lenders, such as Alliance and Leicester, have trebled their original MEAF (Alliance and Leicester's now being £295).

No doubt the possibility of being able to make claims for excess MEAF's will bring about the creation of a whole new claims industry, who will live off other's misfortune.

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