Travis Perkins and Polymetal to lose out in FTSE 100 reshuffle

Builders’ merchant Travis Perkins and mining company Polymetal face relegation from the FTSE 100 after their recent performances were hit by political events. The share price of Travis Perkins has dropped 29 per cent since the UK voted to leave the EU in June, as economic uncertainty has sparked concerns among some investors about the […]

Continue Reading


Eurozone inflation climbs to highest since April 2014

A welcome dose of good news before next week’s big European Central Bank meeting. Year on year inflation in the eurozone has climbed to its best rate since April 2014 this month, accelerating to 0.6 per cent from 0.5 per cent on the back of the rising cost of services and the fading effect of […]

Continue Reading


Wealth manager Brewin Dolphin hit by restructuring costs

Profits at wealth manager Brewin Dolphin were hit by restructuring costs as the company continued to shift its focus towards portfolio management. The FTSE 250 company reported pre-tax profits of £50.1m in the year to September 30, down 17.9 per cent from £61m the previous year. Finance director Andrew Westenberger said its 2015 figure was […]

Continue Reading

Capital Markets, Financial

BGC Partners eyes new platform to trade US Treasuries

BGC Partners plans to launch a new platform to trade US Treasuries early next year, in a bid to return to a market in the middle of evolution, according to people familiar with the plans.  The company, spun out of Howard Lutnick’s Cantor Fitzgerald in 2004, sold eSpeed, the second-largest interdealer platform for trading Treasuries, […]

Continue Reading


RBS share drop accelerates on stress test flop

Stressed. Shares in Royal Bank of Scotland have accelerated their losses this morning, falling over 4.5 per cent after the state-backed lender came in bottom of the heap in the Bank of England’s latest stress tests. RBS failed the toughest ever stress tests carried out by the BoE, with results this morning showing the lender’s […]

Continue Reading

Categorized | Banks, Financial

Co-op set to offload risky assets

Posted on December 28, 2014

A pedestrian passes the entrance to a Co-Operative Bank branch©Bloomberg

Co-operative Bank is under pressure to offload risky assets and strengthen its capital position, after a year of intense regulatory scrutiny.

In December, it became the only UK lender to fail the regulator’s stress tests, making the bolstering of its capital buffers an imperative in the next 12 months.

    This test showed the Co-op would significantly undershoot the 4.5 per cent core tier one capital needed to weather a severe economic scenario.

    However, the bank points out the test measures its balance sheet as at the end of 2013, and does not account for the actions it has undertaken this year to buttress its capital position.

    “These were tough tests and saw RBS and Lloyds Bank scrape through whilst the Co-operative Bank failed,” says Tim Maloney, a partner at law firm Dorsey & Whitney. “To survive, Co-op Bank will need to shed its non-performing assets.”

    The regulator has forced the lender to submit a new capital plan following the failed test result. The plan requires a “rephrased and significant” reduction in its riskier assets, which lowers the need to hold higher levels of capital. The bank emphasised that it does not “at the present time” need to raise new equity capital as a result.

    But the successful sell-off of certain portfolios — namely Optimum, its £7.1bn closed book of bad home loans acquired through the merger with Britannia in 2009 — will largely depend on market conditions.

    While the “economic conditions in the UK are better than originally expected”, according to the bank, market uncertainty in the run-up to next year’s general election could hinder investor appetite for potential sales.

    The focus on strengthening capital buffers could also rein in lending in certain areas. Ray Boulger, a technical analyst at John Charcol, says the bank’s troubles have so far not stopped them from being competitive in the mortgage market.

    “As the only bank to fail the stress test, it they want to expand lending, it makes sense to do so in a lower-risk area that needs less capital,” he says.

    Mr Boulger notes the bank offers competitive rates on fixed-rate, lower loan-to-value mortgages.

    “But this is where all the lenders want to be, so competition is strong,” he says. Concentrating on lower-risk lending will also mean profit margins will not be as high, Mr Boulger adds.

    Indeed the bank has already warned that it does not expect to be profitable until at least 2017. The lender had started to substantially stem losses to £76m in the first half of 2014, down from £845m the previous year.

    But customers are voting with their feet: more than 38,000 current account holders walked out the door in the first half following the storm of negative publicity surrounding the bank.

    With more banks coming to market offering slicker, faster services and as switching becomes easier, the Co-op Bank could find itself struggling to stem the exodus of customers.