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Anorak | Spread Betting: Banking On Mortgages

Spread Betting: Banking On Mortgages

by | 29th, July 2008

GET this: you, the customer, can take out a loan with Lloyds TSB at 7.2 per cent and use the cash to buy shares in the bank which pays a yield of 10.9 per cent.

Easy money. Although would you buy shares in the banking sector?

Yesterday, Lloyds TSB fell 3.9 per cent to 318¼p and Royal Bank of Scotland fell 4.1 per cent to 206¼p. Embattled HBOS was 7.3 per cent weaker at 287½p.

Lloyds TSB is down to 318.25p on the FTSE. One year ago the price was 537. The Spread on Tradefair is 316.6 to 317.2.

The question might be: Would Lloyds TSB lend you money to buy shares in LloydsTSB. Discuss. Or would a bank lends you money to buy shares in Royal Bank of Scotland?

RBS will pay its dividend in shares rather than cash. It’s shareholders will become more involved with the bank in a kind of fiscal group hug (more like a circled wagon train – Ed).

The RBS spread is at 204.9 – to 205.4. This year, RBS stock has been as low as 165 and as high as 514.

These loses helped the FTSE 100 close 40 points lower at 5,312.6. The Tradefair spread is at 5287.0 to 5291.0.

The problem in the banking sector is not confined to the UK.

Down Under, ANZ Banking Group says it needs to make provisions of A$1.2bn for the second half of the year. Shares in ANZ slumped by10.9 per cent at A$15.81, its biggest one-day fall since the late 1980s.

And what of National Australia Bank which announced A$830 million in credit-related losses. On Monday, NAB’s stock lost a further 2.9 per cent to A$25.80.

Doom and gloom for Australian banker, working in a sector that led the S&P/ASX 200 index 1 per cent lower to 4,922.1. Get the Autlia 200 on 4887 – 4891 on Tradefair.

Many banks are too exposed to the property market, especially RBS.

But news is that the property market might not be made of straw and sticks. Something called the National Housing Federation says the housing market downturn will be over by 2010. Price over five years will rise by 25 per cent, which is not at all shabby.

The message is for homeowners to sit tight. For homebuyers the message is to get on the housing ladder – if you can find a place to buy. It’s the shortage of housing stock that will keep the market high.

In May, there were 42,000 new mortgages for house purchases – about a third of the level one year earlier. Finding a mortgage might be harder then finding a house.

Oxford Economics says next year house prices will fall by 2.1%. Then, in 2012, your bricks are mortar will be worth 5.2% more, and 9% in each of the following two years.

So banks that lens may find business picking up.

Or not.



Posted: 29th, July 2008 | In: Money Comments (3) | TrackBack | Permalink