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Northern Crock agrees to emergency meeting

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    Northern Crock agrees to emergency meeting

    Rock agrees to emergency meeting

    The meeting will be the first high-profile occasion for shareholders to grill management after the bank ran into trouble in September.

    Two of the bank's major shareholders are calling for restrictions on the bank's ability to sell the company's assets or issue new shares.

    Problems in financial markets saw a run on the bank earlier this year.

    The bank has also come under fire on Friday after it emerged that it wrongly told borrowers that mortgage payments were overdue.

    Rescue


    I believe that these resolutions are unnecessary and potentially damaging
    Bryan Sanderson, Northern Rock chairman

    Hedge funds RAB Capital and SRM Global requested the extraordinary meeting, but Northern Rock said their proposed resolution would hinder a rescue of the beleaguered bank.

    The two funds have a combined stake of over 16% in the bank.

    They have requested that shareholders should have the power to block any moves to sell more than 5% of Northern Rock's assets, issue large chunks of new shares, or buy any assets.

    Bryan Sanderson, the bank's chairman, urged shareholders to vote against the restrictions.

    "I believe that these resolutions are unnecessary and, in view of the difficult and challenging circumstances currently affecting the company, potentially damaging."

    Northern Rock has borrowed at least £25bn in emergency funding from the Bank of England.

    A consortium led by Virgin Group and a rival investment group called Olivant are in talks with Northern Rock's advisers and the UK Treasury.

    Some politicians and analysts believe nationalisation of the bank or some form of public administration could be the best option.

    Mortgage mix-up

    Northern Rock has come in for criticism from mortgage holders after those who pay their loan installments by standing order were asked to make their monthly payment as soon as possible.

    To avoid possible postal delays, the bank said it sent the letter to all customers, including those whose payments are not yet due.

    Borrower Mark Bond was asked to make an immediate payment on his debit card even though his mortgage payment is not due until later in the month.

    "At first I thought it was just one more branch of their incompetence," he said.

    "I can imagine some people will be panicked into paying on their debit card, then the standing order will go through and they will have paid twice.

    "It's a cash-flow game and I don't think it's appropriate," he added.

    Northern Rock has apologised for any confusion the mailing has caused, and denied there was any intention to encourage customers to pay more than the normal amount.

    The bank's public relations manager Jemma Rundle said the letter sent out clearly states that it should be ignored if a recent payment has been made or an arrangement is in place.

    However, she admitted that this month the bank had sent the letter to all its standing order customers, including a sizeable number whose payments have not yet fallen due, and who were not therefore late.

    -------

    Ok, nevermind emergency meeting, the fact that the Crock is asking customers to make their normal morgage payments ASAP rather than at previously agreed time means that despite tens of billions of cash from BoE they are desperate for money. That's a very bad sign IMO, it sure means that whatever they earn from morgages they sold does not cover their costs.

    #2
    Originally posted by AtW View Post
    That's a very bad sign IMO, it sure means that whatever they earn from morgages they sold does not cover their costs.
    They certainly have some interesting marketing strategys.

    About 4 years ago I was going to redeem the final 40k on my mortgage. They didn't want this, offered me a reduction in rate and a 750 quid sweetner repayable if I redeemed the mortgage in full in the next 5 years. I went for it, got the sweetner cheque and then redeemed the mortgage bar 50 quid. I then adjusted the term so it runs it full course when the 5 years are up so I don't get stiffed for the 295 exit fee I would have paid by redeeming early.

    Comment


      #3
      I noticed them being very active in the last couple of years spamming heavily with cheap loans, it seems to me that they were borrowing short-term money on international markets with cheap rates, but investing into long term loans/etc, so now the interest that they earn from invested money is carp, and since they have to pay penal rate of interest for BoE bail-out it simply means that they don't earn enough to cover their costs.

      I really can't see how private bidder would want to take over this "bank".

      The biggest question is how their customers will deal with higher interest rates as they come off cheap morgages and won't be able to refinance elsewhere at all due to lack of credit - this is actually more important then the fact whether NR goes bust or not.

      Comment


        #4
        Originally posted by AtW View Post
        I really can't see how private bidder would want to take over this "bank".

        The biggest question is how their customers will deal with higher interest rates as they come off cheap morgages and won't be able to refinance elsewhere at all due to lack of credit - this is actually more important then the fact whether NR goes bust or not.
        Private bidders want this company because they have approx. a one Billion pound mortgage book. That is a shedloads of customers which they do not have to find!! Northern Rock may also be losing money on short-term fixes, but when these end the customers go onto the SVR which is around 8 per cent, and it is not easy to move at the moment due to the credit crunch. That is a NICE situation for Northern Rock's profitability in the future.

        Comment


          #5
          Originally posted by Cyberman View Post
          when these end the customers go onto the SVR which is around 8 per cent
          Do you really think that customers that have overstretched themselves at low interest rates of 3.5-4.5% will be able to pay 8% in uncertain economy when jobs are being cut? I think not.

          Comment


            #6
            Originally posted by AtW View Post
            Do you really think that customers that have overstretched themselves at low interest rates of 3.5-4.5% will be able to pay 8% in uncertain economy when jobs are being cut? I think not.

            ...not for long, but most borrowers should be able to handle higher rates if only for a few months.... Incidentally, I am on 7.8% with the Abbey having come off a fixed last month. However, rates are falling and analysts expect 3 or 4 further cuts in 2008.
            Unemployment is low at the moment, and with expected rate cuts and central banks ploughing cheaper funds for banks into the economy to overcome the liquidity crisis, I don't see a major crash, so most borrowers will hopefully be able to 'ride out the storm'.

            Comment


              #7
              Morgage rates are not falling - there is no guaranteed link between morgage rate and BoE rate - when banks lose money you can be sure they will keep rates high to earn them.

              Comment


                #8
                Originally posted by AtW View Post
                Morgage rates are not falling - there is no guaranteed link between morgage rate and BoE rate - when banks lose money you can be sure they will keep rates high to earn them.

                Some including Halifax, Nationwide and Abbey have promised to pass on the full cut. Hopefully,with another cut or so other Banks and Building societies will follow:

                http://uk.reuters.com/article/person...15355920071211

                Comment


                  #9
                  Originally posted by Cyberman View Post
                  Some including Halifax, Nationwide and Abbey have promised to pass on the full cut.
                  You don't get it, do you? There will be a lot less credit and asset values will collapse. This means people will have to start living within their means without borrowing cheap money from ever increasing asset value of their house. This is going to be very painful and for many impossible. Doomed etc.

                  Comment


                    #10
                    Interest rate cuts will not help regain confidence in credit.

                    Comment

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