One of the features of the credit crunch era is that the banks are always in the news which rather oddly is being reinforced this morning by Royal Bank of Scotland.
RBS CEO Ross McEwan is now taking questions from
Yes he was “on the radio” as Donna Summer put it although the repeat button was pressed as we are told this every year until we see a “surprise”.
Royal Bank of Scotland CEO Ross McEwan tells LBC the bank is on target to be in profit by 2018.
Meanwhile a consequence and indeed relic of the start of the credit crunch was disposed of in a burst of spring sunshine for UK taxpayers. From the UKAR.
Bradford & Bingley plc (B&B), part of UK Asset Resolution (UKAR), today confirms that following an open and competitive process it has agreed to sell two separate asset portfolios comprising performing buy to let loans for a total of £11.8bn to Prudential plc and to funds managed by Blackstone.
Although the sunshine is not quite as strong if you read this bit.
delivers value for the taxpayer and compares favourably with the ‘fair value’ of the B&B loan book disclosed in B&B’s accounts last year. The fair value of the B&B loan book is less than its book value, reflecting the low-interest rates payable on the loans.
In terms of scale this is approximately half of the remaining B&B loan book.
This is of course something that is intrinsically tied up with the banking sector and an area where I have been expecting a weakening of the trend and perhaps falls as the year progresses. This morning the Nationwide Building Society has updated us.
The annual rate of house price growth slowed in March to 3.5%, from 4.5% in February. House prices fell by 0.3% in the month, after taking account of seasonal effects.
The monthly figure will send a chill through the Bank of England although we should take care with them. But if we look back there has been a decline in the annual rate of growth since it was 5.6% last August. The numbers in this series have tended to be lower than some of the other house price series.
If we look for reasons why then this in my opinion is the elephant in the room. This is that the house price to earnings ratio is now 5.3 or a smidgen below the 5.4 pre credit crunch peak. Of course a fair bit of that is driven by London which is at a stratospheric 10.1 and on the regional issue there is this.
This is particularly apparent when looking at prices relative to their 2007 peak. For example, prices in London are nearly 60% above 2007 levels, while those in the North, Yorkshire & Humberside and North West are still lower than their 2007 peaks.
Gains for some whilst others may have worries about negative equity in what is something of a mess. But if we look at the whole picture there are clear consequences.
“Over the past decade, there has been a particularly marked decline in the home ownership rate amongst young adults (those aged 25-34)……..The data also reveals a significant fall in home ownership rates amongst those aged 35-44 to just 56% (down from 74% in 2006).
Yet we are so often told that we are better off. Oh and looking at their definitions of house price to earnings I get to 7ish and not 5.3. Roughly 200k divided by 28k.
Let us start with the good news which is that it was confirmed the economy grew by 0.7% in the last quarter of 2017 and there was also this.
The UK’s current account deficit as a percentage of GDP narrowed by 2.9 percentage points in Quarter 4 (Oct to Dec) 2016 to 2.4%.
This is a silver lining in a long sequence of clouds but those who recall past issues will note this and the emphasis is mine.
the narrowing in the current account deficit was mainly due to a significant narrowing in the trade deficit and in the primary income deficit. The latter can be partially attributed to an increase in earnings on direct investments abroad, resulting in the smallest primary income deficit as a percentage of GDP seen since mid-2013.
The numbers in this area were a concern in 2015 as they shifted against us so hopefully this is the start of a new trend although they are very volatile and frankly badly measured. As we have good trade news not that often let’s enjoy this.
largely driven by an £7.6 billion increase in goods exports.
Linked to this perhaps?
The overall narrowing in the UK’s current account deficit also coincided with a substantial depreciation in the sterling effective exchange rate, falling 17.0% between Quarter 4 2015 and Quarter 4 2016.
Oh and there was also this
The international investment position showed net external assets (that is, assets exceed liabilities) of £468.5 billion at the end of Quarter 4 2016, compared with net external assets of £190.6 billion at the end of Quarter 3 2016 . This is the largest net external asset position since records began in Quarter 4 1977.
Okay so how did this happen?
Despite total UK assets falling by £43.5 billion, the drop in UK external liabilities (£321.4 billion) widened the gap between the two and led to the increase in the net international investment position
These numbers are unreliable which repeats what I stated when they were bad. There are two factors here which is the lower value of the UK pound £ ( rough improvement in percentage terms is half its fall) and the fact that so many stock markets were at highs.
The motor industry
This is a counterpoint to the car loans figures I looked at on Wednesday.
The strength in manufacturing over the past 7 years has been driven by the production of motor vehicles, trailers and semi-trailers, which contributed 3.5 percentage points to the total 5.9% in 3-monthly manufacturing growth since May 2010…….The recent strength in UK motor vehicle production is also reflected in recent trade figures, with the latest data showing that passenger motor vehicles were the UK’s second highest exported commodity behind mechanical machinery in 2016
This morning has seen some spring like news for the UK economy. I welcome a reduction in the rate of house price growth as once you look at wages and real wages growth it is plainly sorely needed, otherwise they will have to cut interest-rate forever! We have even trimmed off a bit of the debt from the credit crunch.
But the main news is from the balance of payments and our international investment position where the impact of a lower value of the UK Pound has really benefited them. Unless it continues to fall the impact on our international position is a one-off but hopefully the trade position benefit will continue. As ever the numbers are unreliable but that was also true when they were bad.
For balance the equally unreliable UK savings figures were poor and there was a flicker of concern over the all important services sector which saw a reverse in January.