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The recent crisis caused by sub-prime mortgages is set to be followed by another wave, that of so called "Alt A", or “near-prime” mortgages, HBOS seemingly being one of the worst effected, losing quite a bit of ground on the markets when it revealed that it had £7 billion exposure to these mortgages.
Alt A home loans are taken out by people with no credit history or who self certify their own income, Bear Stearns being another bank with a high exposure to such lending, largely emanating from the American market.
The FTSE 100 closed down after Warren Buffet said that the insurance industry was in for a tough year and that he was no longer prepared to bail out municipal bonds.
In fact most if not all lenders have been hit recently, Alliance & Leicester, Bradford & Bingley, Friends Provident and Aviva seeming to be hardest hit..
Citigroup’s Tom Rayner kept his “sell” advice and 350p target, but trimmed his earnings forecast. “We believe that the share price will be unable to post a sustainable recovery until the issue of excessive balance sheet leverage is addressed,” he said. RBS is coming under pressure for a rights issue to refinance its balance sheet, but management has so far ruled this out..
Only HSBC, managed to buck the bank trend after reporting figures that were better than expected. |
