2012 business prospects,especially in relation to Banks and their behaviour show no signs of improvement. Reported “business as usual” in relation to future Bank borrowings is a total myth. Let me give you an example from mid December 2011:-
Client (sole trader) has been a loyal Bank customer since 1972. I quote from a Bank e-mail…”As previously stated the Bank continue to hold Mr X custom in very high regard.”
All his life client has been involved in buy to let business premises/house/apartment rentals.Present monthly rental income circa £17,500. Steadily increasing retained profit year on year.
Property portfolio in 2007 was in excess of £12M. Now discounted by client and writer to £6M—-at worst.
Previous gross borrowings of circa £1.5M. Clients loan borrowings presently stand at £400,000.
There has been a “minor” clash with new Account Manager over what writer considers to be Bank terms that could and should have negotiated on.
BRS was requested by client to approach other Institutions to establish if there was any appetite for borrowings of circa £500K (£400K existing Bank + £100K to buy further properties); fully conscious this is in the “property sector”
There are excellent cross selling opportunities with this client.
RESULT: Northern/ BOI/ First Trust/ HSBC/ Barclays/ Ulster and 1 Independent Mortgage Advisor either stated “A quick no on this one regarding the sector” or, as in the case of BOI, has still yet to reply despite an initial acknowledgment.
WHAT CLEAR MESSAGE IS THIS SENDING US FOR 2012!!!!!!!
Banks, during the last six months of 2011 have become more aggressive in their approach. Increasing Bank profitability by way of :-
increased Arrangement Fees
introduction of monthly Management Fees
increased interest rates
restructure onto short term loan accounts max 7 years.
increased security /conversion to legal mortgages
the reviewing of existing security at clients expense
have ALL become a regular feature. There is a clear directive to fight their actions every step of the way.
In particular, The Financial Ombudsman Service (FOS) and BRS see cases where the Banks have NOT engaged properly with the consumer (or their representative) to gain a clear understanding of the consumer’s financial position. Where Banks follow iterative or circular processes, consumers can be left feeling powerless to progress their complaints. This difficult situation is made worse by standard or generic statements (by any of the parties) which do not address the consumer’s individual circumstances and may even be inaccurate. So FOS asked Banks to ensure that they do all they can to avoid unnecessary referrals of cases to the FOS – by promoting the early, fair resolution of customers’ complaints. This will best be achieved by ensuring that Banks consideration of these cases includes the proper assessment of the consumer’s personal financial information at an early stage in the complaint.
There are, however likely to be few company bosses waving goodbye to 2011 in Northern Ireland with a smile on their face.
Company closures, personal bankruptcies and business failures have become increasingly common place as Northern Ireland’s economy continues to struggle on all fronts.
There has also been the growing “Nama effect”, with the Republic’s National Asset Management Agency moving up a gear on the number of properties it has repossessed north of the Border in 2011.
Nama, despite its continual protests that it will not engage in fire sales in Northern Ireland, has become a major player in the local economy, where it currently controls more than £3.5 billion of property loans.
One unavoidable side effect of the economic slowdown has been the rise of unemployment in the North over the past 12 months.
Last month’s dole queue rose to 60,900 – the highest figure on record since September 1997.
Since the downturn began to spread in August 2007, the number out of work in the North has risen by 37,400.
This means the much-heralded prospects of a peace dividend have simply evaporated following the meltdown of global financial markets.
Negative equity, job fears and the cost of living dominate the domestic economic horizon.
Richard Ramsey, chief economist with Ulster Bank in Northern Ireland, believes Northern Ireland’s recession was much deeper than previously estimated, and this continued to play out during 2011.
He highlights official figures which show that following growth of 3.1 per cent (real terms) in 2007, the North’s economy contracted by “3.1 per cent in 2008 and by a hefty 6 per cent in 2009”. Heaven knows what 2010 and especially 2011 will show!!!
In addition to the above it’s worth paying attention to Bridgewater Associates, the world’s biggest hedge fund firm. Robert Prince, Bridgewater’s co-chief investment officer, isn’t turning bullish for 2012, he tells the Wall Street Journal. “We’re in a secular deleveraging that will probably take 15 to 20 years to work through and we’re just four years in.”
In the US, consumers are still more indebted – comparing their household income to their net worth – than they were in 2008. In Europe, “you’ve got insolvent banks supporting insolvent sovereigns and insolvent sovereigns supporting insolvent banks”.
So any bursts of growth will inevitably be undermined by the weak underlying position of the economy. Indeed, we can expect slow growth, high unemployment, and low interest rates for a long time to come. The years of credit growth are over. We’re now in a long process whereby instead of increasing our debts, we pay them off.
It was always wishful thinking to hope that this could be dealt with overnight – particularly as our governments and central banks desperately want to prevent asset prices from falling, or any significant players from losing any money.
Are you being forced to adhere to increasingly demanding Bank terms and conditions? Do you need anexperienced independent opinion? Then phone or e-mail BRS to-day for your free consultation.
