Third quantitative easing heavily oversubscribed even at £3Bn

The largest QE Auction to-date at £3Bn received bids at £21.98Bn - a multiple of 7.35 X

The BoE has yet to annnounce the funds available for Monday 23 March but given the appetite it seems logical that the figure may rise either on Monday or at least in time for Wednesday. The benefit has yet to filter through but there does seem to be a strong appetite for this programme which is encouraging.

Second quantitative easing was again well subscribed

There was no surprise that again non-bank institutions yet again didn't subscribe to the Monday 16th morning auction and that the banks again offered up more gilts than were available at £6.8Bn - effectivley 3.4 times oversubscribed. The initial auction was 5 times oversubscribed.

For Wednesday' auction the funds available are £3Bn. There is obviously a desire to create liquidity as evidenced by the the big demand. If the BoE makes too much funding available in any auction and there wasn't a full take-up in funds then ther might be a loss of confidence in the APF programme. 

For now we just want to see SWAP rates easing slightly and 3 month LIBOR rate starting to show a greater effort to move down towards BBR - today it is currently 1.84% against 0.5% !!!!

You can follow our regular updates on our quantitative easing pages.

First Quantitative Easing Auction oversubscribed by Banks this afternoon

The first Quantitative Easing Auction today attracted no takers from the non-Bank Sector this morning but the Banks piled in big style at £10.5Bn against the available £2Bn at 2.15pm this afternoon.

The question is now whether that the momentum will continue and will the money supply start to improve? This should be measured in two ways ....

• SWAP rates noting gilt yields easing unless HMG issue too many out of the "back door"


• 3 month LIBOR rate coming down fromm its plateau at 1.91% and trying to establish some connectivity with BBR at 0.5%

We are not holding our breaths but this APF does offer some transparency and may at last encourage a bit more open dealing out there...ultimately it will lead to improved mortgage and business finance supply.

You can keep up to date on our quantitative easing updates and views online.

Lloyds /HBOS agree to additional £9Bn of business lending this year

The announcement of Lloyds/HBOS finally doing a deal with the Gov't in the APS shoulds bring an additional £9Bn of business lending to beleagured borrowers in 2009.

The deal was finally concluded over the weekend (7 and 8 March) in which some £260Bn of "assets" were moved into the APS and the Gov't stake in the lender moved to 65% and the lender committed to an additional £9Bn of business lending and £3Bn of additional mortgages (residential mortgages and Buy To Let mortgages).

Welcome news, at least in theory, and when added to the commitmenbts also made by RBS there should be some relief in sight for some businesses. Our concern is that previous supplies of liquidity - see our web page - have mysteriously failed to materialise at the SME level and is there any "audit trail" to ensure that previous mistakes are not repeated.

We are going to "track" as best we can the outcomes on the other latest Gov't initiative - Asset Purchase Facility (APF) and keep you updated on both the web and this blog !!!!

BBC 1 Panorama reports on banks' attitude to SMEs

Panorama sent Theo Pathitis of Dragons Den fame out to visit several businesses that were feeling "credit crunched" by their bank either on existing arrangements or looking to expand their business....

Panorama - Credit Where It's Due - BBC iPlayer

A coach operator with good trading background won a tender for a £2M pa contract which would have needed 6 new coaches and created 10 new jobs in Bournemouth. The visit to the bank not only resulted in a refusal to fund the expansion but a demand that their existing overdraft (OD) of £300,000 be reduced to £160,000. Such was the nervousness of the Directors about their position that they wouldn't risk naming and shaming their bank for fear of a furthe cut on their OD.

Various small businesses where their bank was charging fees for being beyond their OD facility but wasn't crediting their account with debit card transactions through a terminal link for 5 working days....enough said

A manufacturing company in London which produces light switches, plugs etc had slimmed down and was looking for working capital having never borrowed in 70 years  to cover the lead time from manufatcure to being paid by wholesale distributors who are slowing up on payment terms. Theo suggetsed approaching 5 banks under the EFG (the gov'ts successor to SFLG) , three of them simply sent the papers back so the statement from the BBA today rings a little hollow ......

Commercial mortgage news - Lenders willing and able to provide business loans

 

There are lenders looking to support growing and successful businesses - and they are not all on the High Street - we will get you indicative terms promptly - phone us on 0845 3456788 or visit our commercial mortgages and commercial mortgage calculator pages to find out more.

Does this story remind you of the last recession?

Recessions bring out the worst in the banks and the current crisis has brought out some bizarre market positioning and message to business borrowers of HSBC...

In the last major recession (1991-1993) banks did not have the sophisticated borrower analysis that is available to them today. It was quite common for Head Office Credit Departments to decide that they had an aversion to certain sectors and then send out instructions to their regional and commercial departments to haul in overdraft facilities to reduce exposure and thereby bring about more busines failures in that sector. When challenged on the wisdom of "targeting" a particular sector, they would cite the recent evidence of business failures aggravated by their actions as a good reason for their actions.

Two sectors that operate on particularly thin margins and are often seen as lead indicators of economic slowdown are transport and print, where the former have had to juggle with the highest fuel costs in Europe and the latter where there is always too much capacity so operating margins can evaporate overnight ! In the last recession we could see a broad approach being applied to these sectors regardless of strength of borrower.

So you would have thought that advances in technology would allow a more measured approach based on the risk that each borrower business represents in any sector ?

And of course which is the one UK Bank that has thus far avoided raising extra capital or become part owned by the Gov't ? 

HSBC have made it abundantly clear that they do not wish to lend on property led transactions even where the borrower is a trading business already banking with them..........I could understand that they have no appetite for new commercial property risk where tenant profile especially within the retail sector can no longer be taken at face value. But to either reject a borrowing request or limit exposure to 50% of purchase price (just one recent example in the engineering sector) to a very successful trading business is non-sensical.

Typically a small industrial unit would see a yield of 7.5% today so paying a commercial mortgage at Base + 3% would be some 3% to 3.5% cheaper than renting provided the deposit by the borrower of normally 25% or 30% doesn't leave the business short of working capital in the short term. But asking the business to inject  50% as in the example above would most probably strain the working capital of the borrower to an unnecessary extent and thereby jeopardise the business itself.

We are seeing more evidence of a broad approach being taken again in this recession because quite simply the banks are short of capital and really need to get loans back in .........If your bank is starting to put pressure on you to payback in part or all of the loan you have with them, we can help - there is still commercial mortgage money out there !!!

Allsop Auction on Wed 11 February produces better results

The latest commercial property auction by Allsop has seen an improvement inactivity with achieved yields down from 8.3% in December to 6.7% on the 18th of Feb 2009.

Total Realisation - £51.7m

90% of lots offered sold

Average Retail Yield - 6.7% (8.3% December 08)

Average Lot Size - £950,000 (£580,000 December 08)

Largest Lot - Lot 27 Bradford £4,740,000

The first commercial auction of 2009 took place on Wednesday 11th February in a packed room and concluded with a remarkable 90% success rate, a very encouraging start to the New Year. As reported following our December auction, there remains a strong appetite for property which, when correctly priced, stimulates competitive bidding. This auction, on average, generated sale prices some 15% above reserves.

As expected, with interest rates at such low levels the cash rich investor is turning to property to take advantage of higher returns. Good quality lots sold particularly well, leading to a hardening in the average retail yield from 8.3% in December to 6.7%. 10 lots achieved yields below 6%.

There was a wide range of private buyers at the auction, including a strong overseas contingent. Interestingly, we also saw a number of 'old faces' returning to the auction room, seeking to take advantage of market conditions.

Successful vendors included British Land (who sold 6 lots raising £14.015m), PRUPIM and ING Real Estate Investment Management, as well as a leading pub operating company who offered and sold a portfolio of 8 retail and leisure investments raising £3.177m.

Highlights included:

·  Lot 5 Ripon, let to Edinburgh Woollen Mill sold for £885,000, 6.2% net initial yield, off a guide of £725,000

·  Lot 6 Soho, let to Spirit Managed Pubs sold for £2,220,000, 5.8% net initial yield, off a guide of £1,800,000

·  Three properties let to HSBC Bank were sold prior to the auction, achieving strong prices with net initial yields down to 6.1%.