Lloyds Grp 9.25 Discussion Threads

[my retirement fund] 01/4/2020 10:37

At last I agree with that Red. I don't actually need the loan. Its just that I thought I may be able to make use of one to grow my business. But of course when I looked at it, it was full of catches. The idea of it really is to allow banks a bit more wriggle room to lend a healthy business by reducing risk. Todays ban on bonuses and dividends makes sense. Imagine if the banks were seen to be paying profits to shareholders and bonuses to staff whilst so many businesses go under.

[redartbmud] 01/4/2020 09:45

MRF

Best wishes that you get the loan and are able to emerge relatively unscathed.
As you point out, time is of the essence for many small businesses, who are quickly running out of it.
Banks are between a rock and a hard place.
The only way that this could work, in the necessary timescale, is that the Treasury advances £billions to banks immediately, and allow them discretion on the loans, without recourse to recover losses incurred.
It will not happen.

[essentialinvestor] 01/4/2020 09:35

The recent sharp rebound in many cyclicals
may indicate an expectation of a V shaped recovery for the wider economy.
I'm not sure it will be that neat and tidy.

[my retirement fund] 01/4/2020 09:34

Actually now that I've written that, the request to cancel dividends and bonuses is probably a precaution to stop a future backlash against the financial system and banks because the government know dam well how many businesses won't get these loans!

[my retirement fund] 01/4/2020 09:32

Red this is a time of extreme anxiety for everyone so I do understand your point. However your point is just an opinion and I disagree with you. I've already attempt to get a loan. So far no luck. I'm very happy to guarantee the bank the 20%. However what they are presently telling me is that if I cannot assure the 80% of the government as well, they can't help. Currently the government loan offer is anything but a free for all! Unless the government change their terms, Your going to hear of a lot of stories of business that got turned down!

[future financier] 01/4/2020 09:20

The biggest problem that banks and potential borrowers have with CBILS is that we have no idea about how the pandemic will progress from here. I believe that my business (120 staff) can survive a three month lock down through furloughing and through most remaining staff taking voluntary pay cuts. But what will happen after that - can we survive after Furlough support is withdrawn? How quickly will business volumes re-build and crucially will we have a secondary lock down in September/October.

So I can make assumptions and apply for a loan on the basis of those assumptions and forecasts produced using those assumptions. But can I afford to give personal guarantees on the basis of my assessment of the likely rate of recovery and there being no secondary lock-down? I am 67 and my pension fund has been trashed in the stock market - can I afford to bet my house as well?

I don't blame the banks for this - but there needs to be a bit more flexibility in the CBILS loan scheme.

[redartbmud] 01/4/2020 09:15

MRF

That fact of capacity to manage the loan book was something that I was conscious of but failed to include in my posts, concentrting on some of the key facts in the scenario.
The government policy was put together 'on the hoof' in response to a fast evolving situation. It therefore meant that the checks and balances that would normally have been applied. were not considered to the level of examination that was appropriate.
In addition, the potential length of disruption to normal lifestyles, work patterns etc. was probably significantly underestimated at the time.
As with the NHS it is a numbers game, where they are already working well in excess of capacity, with the tsunami of demand yet to hit - if cdertain of the financial models cme to pass.
Certainly it will be impossible for banks to prioritise customer demand to meet the needs of the most seriously affected. Indeed, there is a case to let them go to the wall now. If their finnces are that dire, then maybe their future was set in tablets of stone well before the problem arose.
The pressure on bank staff and the application of normal checks and balances procedures, will mean that loans will be granted based on 'loose' scrutiny of the facts.
They are not in a position to assess the depth and timescale of the disruption. That limeline has already extended significantly over the last few days.
Looking at the numbers, including current Government funding plans, it is highly likely that the pressure on the banks will accelerate. Government was highly criticised for it's bailout of banks in 2008/09. Whatever they do now, they will attract the same amount, or more, criticism for whatever they do during this crisis.
In the worst case scenario, Government will have to step in again, but at that point we are talking about the dismantling of capitalism, in it's current form. I doubt that we will reach that point, unless banks are forced to make significant quantities of zombie loans.

[nicholasblake] 01/4/2020 09:09

Meanwhile, challenger backs were lending at a loss, so PPI was used by banks to match them whilst generating an acceptable all-in return. Law of unintenmded consequences.

[cousin jack] 01/4/2020 09:09

This mornings large fall partly due to nervousness at possible tendering by Lloyds I suspect. Particularly bearing in mind their historical treatment of pref. holders. I’m a lot happier with my NWBD holding than my LLPC one.

[pierre oreilly] 01/4/2020 09:03

PPI was just a punitive measure for the banks, along with a bit of zero cost (for the gov) QE. It was nothing at all to do with compensating people who had been treated unfairly, but that was the vehicle.

[essentialinvestor] 01/4/2020 08:54

PPI was arguably an absolute gravy train for many.


Where does all this leave Lloyds?, even if HMG take any hit on the 80%,
that may still leave a hefty bill to pay on potential loan impairments?.

[my retirement fund] 01/4/2020 08:42

Red if we go down that road then the state are going to have to guarantee all business loans 100%. I don't think that would be possible because then the natural checks and balances for credible and non credible loans then evaporates. The other road to go down would to nationalise banks under emergency legislation and then run them according to political policy. I think common sense will have to prevail. It will be painful for a lot of businesses and some won't make it. At the end of the day its more important those who loose financially do not loose their life.

[holts] 01/4/2020 08:41

Thats more than likely , it was one of the biggest approved frauds in creation , there were many people paid out who should not have been I came across a number of people who had made an accurate claim only to find they also were able to be paid out again .

[redartbmud] 01/4/2020 08:19

MRF

I agree that is what was intended by the government, but the pressure is already mounting.
The media has started to run with the comment that the roll out of loands, by the banks, is too slow and that, without immediate funding, businesses will collapse.
Requests, by banks, for private collateral from owners is being refused and pressure is already being put on lenders to overlook this option.
Should they give way, very significant amounts of the loans will default.
The Regulator is already making noises that personal guarantees were never part of the package presented to business by the Government.

They already have form. You can believe me or not, but a late friend, who was a former bank employee, told me that he was aware that his former employer had made multiple PPI refunds to cartain peopls who had not necessarily made PPI insurance payments in the first place. This was as a result of pressure exerted to speed up refunds.
Lloyds CEO was first to capitulate and trow open the vaults, when Government came calling. Will they do the same with zombie loans.

One quarter's disruption will not solve this problem, and we are going to see some very big defaults over the rest of the calendar year.
I am being realistic in my assessment of the scenario.
Time will tell.

[holts] 01/4/2020 08:11

Certainly that is what it should be , if you have an asset at risk it concentrates the mind , trad lending always involved that , its the un secured stuff that is the problem .

[my retirement fund] 01/4/2020 07:48

I think you are somewhat confused. Banks are not being forced to offer loans. If a bank feels the 20% cannot be assured by a credible business plan coupled with assets or some other assurances they simply dont have to and won't!

[redartbmud] 01/4/2020 07:43

Val
I certainly hope that you are correct, but the coupon on this is payable on 31 May.
Thete is plenty of time for it to be pulled, on the basis that the situation has deteriorated, and lack of liquidity in the banking system means that they do not have the available funds to pay any dividends.

red

[skyship] 01/4/2020 07:41

Future Financier - PRA = Prudential Regulation Authority.

Thnx for that

From: a retired financier!

[valhamos] 01/4/2020 07:37

Red We all have opinions - I think what is important with this announcement is to understand the facts. And from what has been announced the preference shares are unaffected.

[redartbmud] 01/4/2020 07:25

Val

I don't think that you appreciate the bigger picture, as in my post 1114.
There will not be any dividends, from banks in the next 12 months. all of the money will be tied up in losses.

[jimbox1] 01/4/2020 07:23

The board would be reluctant to cancel the preference dividends because it would prevent the payment of ordinary dividends and various other capital measures for a year. Relevant paragraph from the prospectus (page 24):

If the Company has not declared or paid in full a dividend stated to be payable on the Preference Shares as a result only of the exercise of the discretion of the Board of Directors or the Committee, then the Company shall not during the Stopper Period: (a) redeem, purchase, cancel, reduce or otherwise acquire in any other way any Junior Share Capital or the 2004 Preference Shares, or (b) declare, or pay or set aside any sum for payment of any distribution or dividend or make any other payment on, and will procure that no distribution, dividend or other payment is made, on any Junior Share Capital or the 2004 Preference Shares.

[redartbmud] 01/4/2020 07:22

Indeed.
Maybe they will clarify that soon.

Just think of the scenario though.
Banks asked to provide tens of billions of loans to businesses, of which only 80% is guaranteed by government.
Many small businsees have zero collateral. They are the ones screaming from the rooftops that their loan applications have been turned down, by their banks, on the basis that their businesses have been trading on the margin, and will not be viable in the new climate.
Government will step in and demand that the bank grants the loan/overdraft, of which the banks will foot the 20% when they go bump, in the next 6 months.
Questionable whether we will get another major banking crisis.
Likelihood - Hmmmm.... don't bet that it will not happen.

In the meantime, how much will these 'entrepreneurs' rape from those businesses, knowing that they have no future?

[jaf111] 01/4/2020 07:11

I hope so too!!!
Not too long to wait of course....next pay-date for these prefs 31 May