Lloyds Grp 9.25 Discussion Threads

[future financier] 04/3/2009 11:54

Just need Philip Gibbs (Jupiter Financial Opportunities Fund) to take an interest and all of these FI stocks would fly - I see he holds 1% of AV - so maybe AV.A is the best bet - think I might follow your lead LG!

[supernumerary] 04/3/2009 11:43

renew - I have US accounts (with Etrade and Ameritrade) so pay only 10$/deal. Dealing through the UK is in my experience an expensive way to trade - comparing the US $ prices on the book to UK brokers' £ prices is rather disheartening.

It's easy opening a US account (or at least it was when I did it) but I seem to remember it did involve paper and signatures flying across the Atlantic, so takes a certain time. Dealing with them has got easier since I realised I can call US 0800 numbers via Skype but the call centres are generally useless - hence the time I spent sorting out the Etrade stock codes for the RBS issues.

[bobdouthwaite] 04/3/2009 11:30

FF and LG - I'm in much the same boat. I also hold CHY, an investment trust currently yielding 14% which is invested in a spread of corporate bonds and prefs, and with the ability to increase equity exposure if they wish. I'm hedged (I hope) against corporate meltdown/hyperinflation with some gold and silver.

[skylaunch] 04/3/2009 11:15

NWBD have dropped significantly - is that bad as in we're not going to be paid and someone already knows, or good as in some sort of ex dividend drop?

[lord gnome] 04/3/2009 11:02

FF - your thinking matches my own - at least as far as the fixed interest part of my portfolio goes. My 'bankers' are AV.A and AV.B and i hold a fair sprinkling of LLP issues plus some NWBD. I am seriously tempted by the RBS $ issues - same risk as NWBD but what a divi if it survives. Maybe just a few then....

As regards ADRs, these are indeed just packages of ordinary shares for the US market. The RBS prefs were specifically issued in the US and are priced in $ and pay a divi in $. They are not ADRs.

[future financier] 04/3/2009 10:57

There appears to be a good concensus that the best plan is a portfolio of different fixed interests - a few dodgy super-high yielders (RBS ADRs mentioned - but I thought that these were just packages of Ords?? - can somebody tell me what is being referred to?), some high yielders like LLPC (but not relying on the security of just one issuer) and maybe a few boring "bankers" (if that is not too inappropriate a term in the current environment!) yielding sub 10%.

OBR - I get the impression you know this area quite well - what do you recommend?

[kimboy2] 04/3/2009 10:08

renew
I bought through TDW. You have to go through the broker and it cost £18 per deal and no stamp duty.

[spittingbarrel] 04/3/2009 09:56

Anyone know the ticker fo the ADR's?

[renew] 04/3/2009 09:45

Supernumery
Can you give us an indication of the costs you had to pay to buy the ADRs and were there any difficulties in buying.

Im also a sucker for temptation!!

[kimboy2] 03/3/2009 22:49

I think the only risk to the RBS ADRs is nationalisation. IMV this is highly unlikely because if it was nationalised, especially with shareholders being uncompensated, then every bank in the world would have to be nationalised.

They will eventually return to a 5-6% return. This means that at present prices you are taking a 10-1 bet that RBS won't be nationalised without compensation.

Too good to resist I think.

[supernumerary] 03/3/2009 22:39

obr- I've now got quite a few of those ADRs – like St Augustine, I can resist anything but temptation – they're either the opportunity or the trap of a lifetime, and no way to know which but wait and see.

xd on the 16th and payment on the 31st – it's going to be an interesting month.

Regarding the pension investment, it must be a real heartbreak for those now reaching 75 and being forced to convert their SIPP to an annuity. They look around and see what they could do with the same funds... UK Pensions policy SNAFU as always.

[skylaunch] 03/3/2009 21:46

What worries me most is that we do not know beyond doubt that they'll actually pay up on any of them, so it is still a big risk for all of us.

I'm sure that the LBG prospectus for the HBOS takeover said that they could cancel the dividend up to 10 days before the payout though.

On LLPE that is the end of tomorrow, so we'll all know soon what the true position is here.

[solomon9] 03/3/2009 21:10

The irrationality that you refer to reflects no doubt that we are yet past the worst point and possibly nowhere near the bottom. Yes the bonds/ prefs all appear cheap, Yes the govt is bending over backwards to avoid nationalisation. The results have created more uncertainty, in addition HSBC has reminded everybody of the over optimism and untruths of 2008. This very nervous environment is gearing up for a massive fall quite possibly soon ie another 1,000 points. We are already down 1,000 points since 6th Jan. I hope I am wrong

[old boy returns] 03/3/2009 20:12

Those US RBS ADR's are giving me sleepless nights trying to make a decision. The extra yield compared to the UK RBS equivalent prefs is just ridiculous as the only extra risk is the exchange risk.

IMHO the best strategy at present for investing in UK bank / building society fixed interest is to spread your money (and risk) among a good number of different banks and societies bonds, prefs and PIBs. That way you can currently build a fairly diverse fixed interest portfolio yielding about 20%. If it works out you could lock in a decent pension income for about one third of what an equivalent annuity income would cost and you get to keep your capital and have the potential for capital growth thrown in for nothing.

[supernumerary] 03/3/2009 18:00

I'm not disagreeing with your argument at all. There just seems so much panic and irrationality around you have to wonder where it could all end. It shows how bizarre the situation is that the banks' investment arms aren't loading up on these - a major part of the problem is the lack of confidence the banks have shown in each other.

Meanwhile some of the US issues are offering 58% yield...

[old boy returns] 03/3/2009 17:14

supernumerary - true but in the current climate wiping out bank bonds and prefs would make equitable life look like a tea party. Don't forget not long ago these securities were rated only a tad riskier than government debt. Pension funds and annuity insurers are heavily invested and could fail without the income from these securities. I reckon it would cause complete meltdown.

[supernumerary] 03/3/2009 16:54

obr - it's never stopped them in the past!

[old boy returns] 03/3/2009 15:16

I am not just talking about the banks making a decision not to pay but also the risk of the government doing something (eg nationaling AND wiping and bonds / prefs). BAsically if the government did that they would be wiping out a massive chunk of current pension income as pension fund, annuity insurers etc will be heavily invested in fixed interest securities and need the income to meet current obligations to existing pensioners. So if the government were to do anything to wipe out fixed income investments in banks the implications would be devastating.

[solomon9] 03/3/2009 15:02

Yes an accounting issue, never said otherwise, I think the point that Eric was making was that Lloyds paid below the tangible net assets of HBOS and will recognise this as a gain, presumably after absorbing more HBOS losses.

[skylaunch] 03/3/2009 14:50

Old Boy and S'numerary - thanks for that, I hadn'tlooked at it like that but see the logic of what you're both saying, more or less 'they daren't risk not paying because of the pain it would inflict on them'.
(I don't think I'm agreeing with you SOLELY because I so dearly want to believe we're safe holding these things!)

[supernumerary] 03/3/2009 12:47

OBR - I am also convinced that any default on preference dividends would be seen as a precursor to a default on bonds, and would therefore cause the US rating agencies to downgrade the quality of bank debt.

The resultant increase in their financing costs would probably be more than they would save by not paying the divi in the first place.

[old boy returns] 03/3/2009 11:22

IMHO there is not much point in getting too worked up by the fall in prices of bank fixed interest stuff (PIBS, bonds, prefs) at present. There are very high yields all over the place and you could easily construct a fixed interest portfolio with a good spread between different banks and building societies witha 20% yield at present. I see it as an amazing opportunity to create my own fixed interest pension fund.

At the end of the day I cannot see fixed interest capital in UK banks and buidling societies being allowed to be wiped out or stop paying dividends. Reason being that most pension funds, insurance comapnies, annuities etc. are heavily invested in this sort of stuff which not long ago was seen as pretty copper bottomed, boring, safe fixed interest havens for pensions. The collapse in equity markets and, in particular, decimating dilution of bank shares has already created a pension problem for the future. If fixed interest is allowed to go the same way then we are looking at a massive pension problem for the present as funds / annuities will not have the income to pay out to pensioners. That would pretty much be THE END.

[sommet2] 03/3/2009 10:36

FF,
That is my hope to.With regard to the Lloyds prefs it seems to me that if they pay this month they will keep on paying because I cannot see the situation getting any worse. They will not be paying out of profits so even if they continue to make loses we should be ok.I find it difficult to believe that what I am saying is true because otherwise the prefs would be trading a lot higher.I would not touch RBS prefs but may add to my Lloyds. What do you think?

[future financier] 03/3/2009 10:24

solomon - the write back of -ve goodwill is just accountants playing with numbers - there is no disguising the underlying loss of the HBOS business - and that is what is all too likely to deteriorate further in 2009 as the depression takes hold. HBOS losses in 2008-2010 are highly likely to exceed the total -ve goodwill on acquisition - but that is not to say that it won't come good in time and generate profits that justify the price paid.