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News : International Last Updated: Feb 5, 2013 - 11:27 AM


Markets: Barclays raises PPI/ rate mis-selling charges to £1bn+; UBS posts loss
By Finfacts Team
Feb 5, 2013 - 11:22 AM

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Anthony Jenkins, Barclays Bank CEO since Aug 2012.
Barclays Bank
today increased the amount of money it has to provide for cover mis-sold financial products to consumers and business by more than £1bn.

The bank said on Tuesday that it will be making an additional £600m provision for mis-sold PPI (personal protection insurance), and £400m for interest rate swaps.

Craig Lowther, managing director of PPI claims company, MoneyBoomerang, commented: "These latest provisions drive home once and for all the gargantuan scale of the banks' mis-selling to both individuals and SMEs.

"It wasn't too long ago that Barclays made a £700m provision for PPI. Even now I don't expect this to be the end of it.

"We expect provisions for interest rate swaps, like PPI, to continue to rise over time. The overall provision in 12 and 24 months' time will be a world apart from what it is now. It will be a mirror image of PPI.

"In fairness to Barclays, it is taking the lead on meeting its obligations, is proactive in the claims process and is putting many other banks to shame. However, there remains a deep-seated intransigence at many banks, an instinct to delay rather than play ball. Either that or to pass valid claims through to the Financial Ombudsman Service, which is struggling.

"We continue to call on both the FSA and the FOS to increase pressure on the lenders who are dragging their heels."

BP, the UK oil giant, today reported that fourth quarter net profit, adjusted for non-operating items and accounting effects, fell to $3.98bn from $4.99bn a year earlier.

The decline mainly resulted from the sale assets to pay for liabilities arising from the 2010 oil spill disaster in the Gulf of Mexico..

The company disposed of $37.8bn worth of assets since the oil spill and has incurred charges against profits of $42.2bn.

UBS, Switzerland's biggest bank, today reported a fourth quarter net loss in 2012 of 1.9bn Swiss francs due to lawsuits related to LIBOR interest rate fraud and restructuring.

UBS reported a net profit of 324m francs in the fourth quarter of 2011 after a $2bn rogue trading scandal.

The said the fourth quarter loss mainly to "net charges for provisions for litigation, regulatory and similar matters as well as net restructuring charges and an own credit loss."

Justin Doyle, Investec Bank Ireland, said today:

  • "Just when you thought it was safe to go back into the water. Eurozone concerns are back to the surface yet again as they take a lump from the bubble of burgeoning global risk appetite;
  • At he heart of the turn in sentiment is the Spanish PM and calls for him to resign over a corruption scandal involving past illegal payments. He denies any wrongdoing obviously. It also seems that Silvio Berlusconi is doing slightly better in the polls than was previously expected ahead of the Italian general elections later this month;
  • The current Spanish government falling apart and Silvio Berlusconi back in power, now there’s a few sleepless nights that Angela Merkel and Mario Draghi could do without;
  • European, U.S. and Asian equity markets took a pasting yesterday and overnight with most of the major global indices posting anywhere between a 2% and 3% loss on the day;
  • After a stellar January, European sovereign bonds and the single currency had their first big down day since the beginning of the year. The Euro has corrected nearly 2% against the dollar, sterling and yen since close of business on Friday evening."

Economic View: January Exchequer figures boosted by sale of CoCos; Juliet Tennent, economist at Goodbody, comments - - "Just in time for the Troika, which is currently on a review mission, the first piece of data on the Irish public finances of 2013 was released yesterday in the form of the January Exchequer Returns. While it will be some months before trends start to emerge initial indications are on balance positive. On a headline basis the Exchequer posted a surplus of €704m in January but that was largely due to the sale of the contingent capital notes in Bank of Ireland which netted the exchequer over €1bn in January.

On an adjusted basis the Exchequer posted a deficit of €406m, which is c.€60m better than the adjusted deficit recorded for the opening month of 2012. On the tax side, revenues increased by 3%, compared to January 2012, to €3.774bn. Adjusting for the timing of corporation tax and the Health levy, underlying receipts grew by 5.6% on an annual basis. Encouragingly, this was driven by a 10% increase in income tax and a 1% increase in VAT. Current expenditure increased by 7.2% when compared with January 2012 but this is mainly as a result of timing issues for public service and social welfare paydays which should even out over the course of the year. However, we expect that controlling the Health budget will again prove problematic, given that overspending in this area led to a supplementary health budget at the end of 2012. The Troika has already expressed their concerns in this regard and a successful conclusion to the on-going negotiations to extend the Croke Park agreement will ultimately be the key to achieving savings in the area.

While the January figures suggest that the underlying momentum remains positive it is too early to discern any underlying trends. However, we expect Ireland to meet its 7.5% deficit target this year. A task made less onerous following a better than expected outturn for the public finances in 2012."

Banks: Tensions growing between Government and Central Bank; Eamonn Hughes and Colm Foley comment - - "A report in today’s Irish Independent indicates that tensions are growing between the Central bank and the Government on the pace of action from the pillar banks in relation to arrears. A new cabinet sub-committee has been set up by the Government to bring greater emphasis to the issues of mortgage arrears, small businesses, lending and dealing with debt.

The Government believe, since the Personal insolvency bill was passed, that all the tools are in place for the banks to deal with the arrears issue, however, the Central Bank argue it is already working with the banks to find resolutions and that setting specific targets for debt forgiveness and mortgage arrears reductions may see the first applicants given relief in order to reach targets.

The evidence suggests that the banks are beginning to deal with the issue in a more meaningful way but that the Government has yet to see the expected headline figures. The level of mortgage restructuring at the banks has accelerated in recent months and we anticipate further engagement between the banks and indebted customers under the Personal insolvency legislation. Whilst the legislation has measures to protect the family home, we anticipate a substantial pick-up in the rate of repossessions particularly in the buy-to-let sector."

US Markets

In New York Monday, the Dow fell 130 points or 0.93% to 13,880.

The S&P 500 slid 1.15% and the Nasdaq dropped 1.51%.

Asia Markets

The MSCI Asia Pacific Index dipped 1.3% in Tokyo Tuesday.

The Nikkei 225 fell 1.90%; China's Shanghai composite index rose 0.20%; South Korea's Kospi fell 0.77%; Australia's S&P/ASX 200 slipped 0.51%; in Mumbai, the Bombay Stock Exchange's Sensex 30 dipped 0.46%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 gained 0.46% in morning trading Tuesday.

In Dublin, the ISEQ  is down 0.27%.

Ryanair slid 1.19%.

European Benchmarks

Irish Share Prices

Key Index Performance Statistics

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies

The euro is trading at $1.3547 and at £0.8584.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.

Commodities

The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time High of 11,771 on the 21st of May, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

On Thursday, July 15, 2010, the index fell for the 35th straight session, by 9 points, or 0.537%, to 1,700 points, Bloomberg report.

On Monday this week, the BDI fell 5 points  or 0.67% to 745 - -  the BDI is up 7.30% in 2013.

Crude oil for March 2013 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $96.58 up 42 cents from Monday's close. In London, Brent for February delivery is trading on the International Commodities Exchange at $116.12. The North Sea benchmark accounts for two-thirds of the global market.

Bloomberg reports that for the first year since the futures were created, Brent crude is poised to overtake West Texas Intermediate (WTI) oil as the world’s most-traded commodity.

Daily trading in Brent jumped 14% to average 567,000 contracts in the year to November 20 compared with all of 2011, while WTI fell 17% to 575,000, according to data from the ICE Futures Europe exchange in London and New York Mercantile Exchange compiled by Bloomberg. The number of Brent futures changing hands has exceeded those for WTI every month from April through October, the longest streak since at least 1995.

Brent, produced in the North Sea, is gaining favour among traders because of its role as the benchmark for energy prices from Saudi Arabia to Russia. Prices have climbed 34% in the past two years, reflecting everything from war in Libya to the embargo on Iran. WTI, the main grade in the US, has risen 9% as the nation, which prohibits crude exports, has struggled to clear a glut at Cushing, Oklahoma, the delivery point for Nymex futures.

Gold spot price

The spot price of an oz of gold is trading in New York at $1677.70, up $3.30 from Monday's close in New York.

Gold had hit a record high of $1,921.05 a troy ounce on Sept 06, 2011.

Check out our subscription service, Finfacts Premium , at a low annual charge of €25 - - if you are a regular user of Finfacts, 50 euro cent a week is hardly a huge ask to support the service.

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