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HBOS and RBS among worst hit as FTSE 100 slumps by 5%



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Published Date: 06 October 2008
By DAVID GUNN
HBOS and RBS were among the FTSE 100 companies heaviest hit as the Index tumbled more than 200 points today after a weekend of financial turmoil in Europe.
Halifax Bank of Scotland – soon to merge with Lloyds TSB – plunged 15% in the sell-off, while Royal Bank of Scotland suffered a 10% drop.

Investors took scant comfort from Friday's backing of a US financial rescue to leave the FTSE 100 Index down almost 5% or 240.5 points at 4739.

Japan's Nikkei 225 average was down more than 4% at a four-year low while in Hong Kong the Hang Seng slipped 4%.

Banks were under pressure after German mortgage lender Hypo Real Estate became the latest to receive state aid.

Analysts said the impact of the latest crisis crossed all sectors amid fears of slowing demand.

The market was also hit hard by hefty falls from heavily-weighted mining stocks after experts warned that the sector's earnings could almost halve this year.

Declines seen on the Footsie were mirrored elsewhere in Europe, with Germany's Dax 4% worse off amid alarm over the country's rescue of its second biggest commercial property lender.

A raft of European Government moves to save banks over the weekend also saw fears mount over rapidly-spreading contagion from the credit crunch.

Iceland scrambled to secure a deal to rescue its banks and wider economy, while French bank BNP Paribas agreed to buy a majority stake in struggling bank Fortis, which is already part-nationalised.

Italy's second largest bank UniCredit was also reportedly launching a fund-raising scheme to survive.

Market analysts said trading was chaotic as panicky markets reacted to the weekend's developments.

Tom Hougaard, chief market strategist at City Index, said: "We have a seriously weak and fear-driven market at our hands.

"It is anyone's guess where we will end the day."

CMC Markets dealer Matt Buckland added that there was scepticism over the US bank bail out plans.

"The Fed's bail-out plan may have been passed on Friday, but so far there's been no real reaction in credit markets and because of this the natural assumption is going to be that the measures won't work, even if such a call is rather premature," he said.

America's Dow Jones Industrial Average closed down 1.5% on Friday, giving up initial gains seen ahead of the plan being passed.

The full article contains 408 words and appears in The Scotsman newspaper.
Page 1 of 1

 
1

Stephen Cowley,

Edinburgh 06/10/2008 10:50:49
It is remarkable that, following the Congress vote against the $700 billion bail out, the stock market rose; whilst, now that it's been passed, it has fallen (5% as I write).

This is the opposite of what almost all commentators and politicians were predicting. All we got from them in justification was the remark about wanting to "help Main Street" - not a lot of clarity there, to my mind.

Maybe there is less enthusiasm for attempts to manipulate the market - Keynes style - than is commonly supposed.
2

Stephen Cowley,

Edinburgh 06/10/2008 10:52:58
What I am saying is - why not put the banks into receivership or let debt for equity swaps take place, rather than getting the taxpayer involved, i.e. let the consequences of the poor investment decisions stay with those who made them.
3

A Friend of Fernando Poo,

06/10/2008 13:17:41
#1: Both the Keynesian and Monetarit analyses say to cut interest rates (assuming the central banks have any real effect any more) and use taxpayer cash to bail out the banking system.

What's not considered is whether the Austrians might be correct and that the recession is here to clear out malinvestment. If they're right, then all we're doing is throwing away cash while delaying the cure.
4

Stephen Cowley,

Edinburgh 06/10/2008 13:44:19
#3
That's helpful, Friend. It sounds like I'm an Austrian and that "Austrian" views are virtually unrepresented in the media. My main point was about accountability though, rather than economic theory.
5

Ugly George,

edinburgh 06/10/2008 14:17:41
Those who advocate that the UK should follow Ireland by offering an ulimited guarantee on bank deposits should note that the Irish banks share prices are receiving an even bigger hammering (at present anyway) than the UK banks.

Also please note this comment from Bloomberg:

"Sept. 30 (Bloomberg) -- The perceived risk of a bond default by Ireland surged to a record after the government said it will guarantee the deposits and borrowings of six lenders."

6

notime4anovice,

glasgow 06/10/2008 14:25:47
The $700Bn bailout in the US will have no effect on an estimated debt of $6trillion. It's a sticking plaster to get the US through an election and allow banks to operate a little while longer so they can offload some more junk onto the taxpayer.
Banks are all insolvent so won't lend to each other as they know they won't see the money again if the borrower crashes.
7

The Strategist,

06/10/2008 14:59:03
#6 has hit the nail on the head. We should start a new mutual called "Bank For Scotland" and dump both HBOS and RBS as fast as we can. These artefacts of the now dead Anglo Saxon economic model need to wiped off the face of the earth for the damage they've done.
8

Brodric,

06/10/2008 15:08:06
We are in uncharted territory. The model we have been following is flawed and nobody really knows what will happen, or what could resolve the situation.

What worries me is that governments are not really informing their citizens of the gravity of the situation and what the worst possible scenario might be.

Looking at the Icelandic position today, is it not possible for a country to become insolvent. And if that happens, what are the possible consequences?

And where are governments going to stop? Shoring up the banks and financial institutions; what about toxic pensions? what about companies that are being forced into slow-down - should the government be shoring them up?

It is all quite unnerving!
9

mike3,

midlands 06/10/2008 15:19:37
#7

RBS certainly seemed to get things very wrong with the ABN takeover. And how many bundled US mortgage IOUs have they bought?

And then there's BS with their Halifax merge?

OK then, I suppose any bail out of Scots banks should certainly be by the Scots themselves to make sure that it's done properly?
10

W Smith,

Middle East 06/10/2008 15:31:44
This is no time for a novice!

Luckily for us our Gordon and his Darling have cured the economy of boom and bust.

This cure is working while we speak.

Don't panic.
11

Rosscobhoy,

06/10/2008 15:40:23
Well, now down 8.5%, anyone fancy risking a few quid?
12

Robert Mason,

Larkhall 06/10/2008 16:08:12
This is the fault of Salmond and his ill informed anti merger campaign. An absolute disgrace.
13

Nevsky,

Moscow 06/10/2008 16:19:18
12 Mason#

Brown will pay at the election for the mis-management of the ecomony. Years of 'irresponsible' lending under his tenure has led to savers losing billions.

He will lose his job, others will lose their houses and jobs! That man has a lot to answer for and i hope he spends the rest of his life in the full knowledge of what he has done to people!
14

Nevsky,

Moscow 06/10/2008 16:22:11
9 Mike#

Think you will find the only banks that have failed have been English ones, B&B and Northern Rock.

Just why should Scots be bailing out failed English companies?

15

A Friend of Fernando Poo,

06/10/2008 18:58:08
#8 Brodric reckons:

"We are in uncharted territory. The model we have been following is flawed and nobody really knows what will happen, or what could resolve the situation."

I'll make two predictions:

1) We'll get a bad recession or a depression.

2) That will resolve the situation.

This ain't the problem. The bubble was the problem. This is the cure. It'll hurt, but if we take our medicine, it will cure the problem.
16

Brodric,

06/10/2008 23:12:26
No 15 Friend of the Poo - very droll.

Recession, depression. What does all that mean in real life terms at perhaps the worst end of the spectrum.
17

,

06/10/2008 23:39:14
Comment Removed By Administrator
Reason:
18

A Friend of Fernando Poo,

06/10/2008 23:43:04
#16: Not trying to be droll, just calling it as I see it.
19

Bigwull,

edinburgh 07/10/2008 08:14:13
What happened to all the billions of pounds of profits these banks were making up to last year, and when are their figures out for this year?
20

Dissector,

Stirling 07/10/2008 09:05:30
The image of headless chickens comes to mind when assessing the CEOs of the UK and other major banks - that's probably being very rude to headless chickens.

Lady McBeth, wringing hands, doom and despair - where is the quality of leadership, sensible decision-making and courage - totally absent. Looking back - 1974 / 5 in particular - there were leaders who led - made decisions and implemented them over months. The current lot appear incapable of nothing other than Blame Someone Else and inaction.

A pitiful group meandering in and out of a pitiful government office.

 

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Are RBS and HBOS right to cancel their staff Christmas parties?
Yes, they can’t afford to waste money on jollies
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If it costs to cancel anyway they should just have them

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