Pre-Tax Profit Table

A quick look at this year's Pre-Tax Profit Table makes for uncomfortable reading. Of the 151 banks, 51 - an astonishing 1 in 3 - are loss-making. With an average profit of around £53,000,000, if one were to take out the top two banks, Barclays and HSBC who together made over £10 billion, the average profit would be (consolidations aside) - a loss!

The Fab Four

Of the 153 UK incorporated banks there are only four that have seen an increase in pre-tax profits - year on year - over the past 4 years.

They are:
Santander UK Plc
Smith & Williamson Investment Management Ltd
Standard Chartered Bank
Abbey National Treasury Services Plc

Are the well capitalised banks the biggest banks?

When it comes to lending there are good banks, there are reckless banks and then there are all those in the middle. As a shareholder one wants to see a good return on one's investment but in pushing a bank too far into unsuitable lending in the search for ever better returns one wants / needs a good capital base to weather the storms that crop up from time to time. The alternative is to plump for a bank that is well capitalised and prudent in its lending.

Interestingly, the 11 best capitalised banks (capital / assets) are all in the bottom 50 in terms of total assets, suggesting that biggest isn't always best.

The eleven are:
1. China Construction Bank (London) Ltd
2. Melli Bank Plc
3. Bank of the Philippine Islands (Europe) Plc
4. Metro Bank Plc
5. European Islamic Investment Bank Plc
6. C I T Bank Ltd
7. Allied Bank Philippines (UK) Plc
8. Bank Saderat Plc
9. Macquarie Bank International Ltd
10. Gatehouse Bank Plc
11. A N Z Bank (Europe) Ltd

OneSavings Bank Plc

OneSavings Bank Plc is the new kid on the block in the new 2011/12 edition of Bank League Tables. One Savings Bank used to be Kent Reliance Building Society and now trades as Kent Reliance. We have lost Liverpool Victoria Banking Services Ltd and Capital One Bank (Europe) Plc. The Hardware Federation Finance Co Ltd has changed its name to BIRA Finance Ltd, and Kleinworth Benson Private Bank Ltd has dropped the "Private".

Southsea Mortgage & Investment Company Ltd

So there you have it. Big banks = Bailed out. Small banks = Not bailed out.

"Southsea" was the smallest capitalised bank of all the UK incorporated banks at just £2.5 million as at 31st March 2009. However its capital / assets ratio (22.10%) put it in the top 40 of the UK's 154 banks, likewise its gearing (3.52:1).

What are the lessons for the future? If you have more than £85,000 on deposit, split it up between the 154 banks. And if you have more than £13 million (154 x £85,000)? Buy some gold.

Bank League Tables 2011 / 12 will be out at the end of the month.

Southsea Mortgage & Investment Company Ltd

Press release from Bank of England. 16th June2011.

Following a decision by the Financial Services Authority (FSA) to initiate the special resolution regime (SRR), and a subsequent application to court by the Bank of England, Southsea Mortgage and Investment Company Limited (Southsea) has been placed into the Bank Insolvency Procedure and BDO LLP (BDO) has been appointed bank liquidator. As of today, Southsea has therefore ceased trading.
The failure of Southsea, a small bank with just over 250 depositors, follows a deterioration in its financial position as a result of management decisions and the firm’s specific business model. At failure, the firm had retail deposits of £7.4 million.
The Financial Services Compensation Scheme (FSCS) is in place to protect eligible deposits up to the insured limit of £85,000. As a result of Southsea entering the SRR, the FSCS will pay compensation to each eligible depositor up to the limit of £85,000. In order to minimise disruption and to provide access to funds, the FSCS intends to make its payout as quickly as possible. Retail depositors do not need to contact the FSCS to receive a payout as the FSCS will be contacting them. Further details about the payout, including information about whether deposits are eligible, can be found at www.fscs.org.uk or by calling the FSCS on 0800 678 1100 or 020 7741 4100. Eligible depositors with amounts in excess of the insured limit of £85,000 may be entitled to receive a share of their savings above this limit, as part of the insolvency process.
Depositors who are not covered by the FSCS will, like other creditors of Southsea, be able to claim in the insolvency. Such creditors should contact the bank liquidator, BDO, to register their claim on 020 7486 5888.
Anyone with mortgages or loans from Southsea should continue to make repayments and service their debts in the normal way. If they have any queries, they should contact BDO using the telephone number above.
In making this decision, the FSA have determined that the conditions for initiating the SRR under the Banking Act 2009 were met: ie that Southsea no longer satisfied the FSA’s threshold conditions for operating as a deposit-taker, and that it was not reasonably likely (ignoring any action which could be taken under the Banking Act) that action would be taken by, or in respect of, Southsea that would enable it once again to satisfy the threshold conditions. In applying to the court, the Bank of England has acted under the powers conferred on it by the Banking Act 2009, having regard to the Code of Practice issued by HM Treasury. The decision followed discussion with the FSA and HM Treasury and an evaluation of the possible resolution options against the SRR’s objectives laid down in the Banking Act.

Highest Paid Director

The 11 banks with the highest paid director are all profitable. However, at number 12, in comes Credit Suisse (UK) Ltd with its highest paid director pulling in £1.6 million despite making a loss of £16.8 million. This amounts to being paid £1 for every £10 lost! How much would he have been paid if the bank had actually made a profit?!

The Loss-Making Banks: Who are They?

There are some big banks in the UK...some very big banks. The ten largest banks have over £7 trillion in assets. Compare this to the ten smallest banks - they have around £263 million in assets. Three of the ten largest banks are loss-making and...three of the ten smallest banks are loss-making. The financial problems of the UK banks have affected banks of all sizes, although most banks are still profitable. The smallest (loss-making) bank is Southsea Mortgage and Investment Co Ltd although, measured by Return on Assets, its loss is not too bad with a negative Return of 0.10%. Compare this to Liverpool Victoria Banking Servicers Ltd with a negative Return of 28.30% and a loss that puts it in the top 15 of loss-making banks.

1 in 3 banks are loss making

The latest edition of Bank League Tables, published in December 2010, show that 55 of the 154 UK registered banks are loss-making. The most unprofitable bank is Royal Bank of Scotland Plc which made a pre-tax loss in the year to 31.12.09 of £15,284,000,000.

Financial support for BHF-BSSA members.

From http://www.bhf-finance.co.uk/news.htm [01/11/2010]
Just to put it into context, the UK Government has provided nearly £1Trillion of support to the banking sector since the start of the financial crisis which is more than half of the entire annual economic output of the UK. Without bank lending increasing significantly, there were fears that there was no hope for a full economic recovery. Are banks lending more as a result? No, in fact they are lending less.As big banks are adopting a much more cautious approach to lending these days and have greatly suppressed their appetite for risk, the cost of borrowing has climbed as many BHF-BSSA members know to their disadvantage.
Some big banks will happily produce misleading league tables showing them to be top of the Price Comparison League Tables based on their headline rates but few people qualify for them as “the actual rate we offer may be higher depending on our assessment of your personal circumstances and financial behavior”. For BHF-BSSA members, there is one rate only and it is a fixed and competitive rate. All of our personal loans are at fixed rates which means that you know exactly what you’ll be paying for the duration of the loan which, in these uncertain times, is reassuring. In addition, to keep costs down, banks are driving applicants online but this means that the application will appear on your credit history. An application to BHF Finance does not go on record as it is a personal matter between the member and the Trade Association.
BHF Finance is a registered bank and is unfairly caught by the onerous, new banking regulations from which there is no escape. The latest Bank League Tables published by Searchline rightly show that we are one of the smallest banks in the country at number 153 out of 155 on the Value of Assets table. However, when it comes to measuring the financial strength of the Bank then we move up to number 21 on the Capital to Assets table. What a shame it is that we are penalised for being well structured and well managed. Our profitability will be challenged further by the additional costs of complying with these regulations .To be able to absorb these increased costs we need as many members to use the service as possible. Why not give one of the BHF Finance team a call on T: 0121 446 6688 or visit www.bhf-finance.co.uk and see if we can help?

2010 / 11 edition out

The new edition of Bank League Tables has just been published, price £191.50. Order online at www.searchlinepublishing.co.uk or 'phone 020 8468 7945.

More losses at Egg

Egg Banking Plc's accounts recently filed at Companies House do not make happy reading. Losses for 2009 amount to £211 million with an additional tax charge of £50 million. Four years ago Egg's total assets were £11 billion, at the end of 2009 they were £5.8 billion. Advances at the end of 2005 were £7+ billion, 2006 £6+ billion, 2007 £5+ billion, 2008 £4+ billion and 2009 £3+ billion. At this rate by the end of 2012 it won't be lending anything! No wonder the bank's up for sale!

Ivobank to close

The dedicated bank to the online gambling sector is to close down after its backers, the wealthy Sampoerna family, declined a request by the Financial Services Authority, the City regulator, to inject more funds to keep it solvent, according to eGaming Review, the magazine, as reported in The Times.

Since gaining its banking licence, Ivobank Limited has never made a profit, turning in losses of £5.2million for the year to 30th June 2006, £12.3million to 30th June 2007 and £17.5million to 30th June 2008 putting it one off the bottom of the Return on Capital league table and bottom of the Return on Assets league table.

74.75% interest rate

Vanquis Bank Ltd (Chairman: Mr Crook) is offering credit cards with an interest rate of 59.9% and cash transactions with an annual rate of 74.75%.

Is this a record for a UK regulated bank?

Spinning the Loss

MBNA Europe Bank Ltd made a pre-tax loss in the year to 31st December 2008 of £43,594,000. Not that the Director's report spells this out. Whilst it is usual to mention the pre-tax figure, this year MBNA has chosen to refer to the profit after tax, which amounts to a relatively modest £1,200,000, due to a large tax credit.

Provision for bad and doubtful debts for 2008 amounts to an eye-watering £1,061,635,000.

Is this a record?

Colleagues

HBoS publishes its latest report and accounts and it no longer has employees - they are now colleagues. Why?

Pre-tax Profit Table

Despite the well-publicised difficulties of some of our biggest banks, it is not doom and gloom everywhere. The latest edition of Bank League Tables shows that 119 banks made a profit whereas "only" 36 made a loss.

Well done Liverpool Victoria directors!

Every year for the last 5 years, Liverpool Victoria Banking Services Ltd has made pre-tax losses which, up to the end of 2008, top £115,000,000. With 2008 returning the greatest loss (at £30,393,000) it surpasses 2007's loss by over 18%. Despite this the highest paid director's remuneration went up by 10%. Nice work if you can get it.

The Biggest Annual Report

The Royal Bank of Scotland Plc's Annual Report and Accounts retains the prize as the report with the most number of pages. For 2008 there were 296 pages, up 19% from 2007.

New Edition

The new 2009 /10 edition of Bank League Tables is published today. Please email us at bankleaguetables@aol.com for a leaflet.