Northern Rock - how badly could foreclosures hit it?

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Jethro Tull said:
Maybe so but the bottom line is I've been reliably informed that credit default swaps on securities issued by a company with NR's rating should be trading at about 50 basis points. Was trading at rougly 3 times that on friday and 2.5 times that monday.
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Just make sure that this reliable informant is fully aware that the spread on corporate swaps has been absurdly low for quite a long time. That may well now be at an end, with a reversion to the mean taking place.

However, fortune favours the brave and a 1.5% spread seems reasonable if you trust Moody's rating.
 
room305 said:
Just make sure that this reliable informant is fully aware that the spread on corporate swaps has been absurdly low for quite a long time. That may well now be at an end, with a reversion to the mean taking place.
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He's worked trading them for about 3 years so I'm sure he's aware of that.
 
Why was this thread started ? Seems to me to be scare mongering. Ask the same question of BOI, AIB and why not the local credit union. There's less than 2bn in NR which is largely guaranteed : BUT there's 14bn in the unprotected, non-guaranteed, partially regulated credit union sector. Have you read the Indo...seems to me the real concern is flying under the radar screen right now..with all the potential of creating a real S***t storm for everyone regardless of their Moody rating. Damage to public confidence etc looms larger.
 
Riddler said:
Why was this thread started ? Seems to me to be scare mongering. Ask the same question of BOI, AIB and whay not the local credit union. There's only 1.5bn in NR but 14bn in the unprotected, non-guranteed, partially regualted credit union sector.
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Northern Rock have an exposure to sub-prime (100% mortgage) in the UK (24% of their books, if memory serves me correctly). They are heavily leveraged and rely on the money markets for short-term cash to continue lending.
 
Riddler said:
Why was this thread started ? Seems to me to be scare mongering. Ask the same question of BOI, AIB and why not the local credit union. There's less than 2bn in NR which is largely guaranteed : BUT there's 14bn in the unprotected, non-guaranteed, partially regulated credit union sector. Have you read the Indo...seems to me the real concern is flying under the radar screen right now..with all the potential of creating a real S***t storm for everyone regardless of their Moody rating. Damage to public confidence etc looms larger.
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I started the thread as I have far more than €20k on deposit with NR and far less than €20k on deposit with BOI, AIB, etc...! I am a happy customer, not trying to scaremonger, just curious about their exposure and the risk to my deposit - TBH I don't care as much about other people's savings with other banks, it ain't mine!
 
ionapaul said:
I started the thread as I have far more than €20k on deposit with NR and far less than €20k on deposit with BOI, AIB, etc...! I am a happy customer, not trying to scaremonger, just curious about their exposure and the risk to my deposit - TBH I don't care as much about other people's savings with other banks, it ain't mine!
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I am like Ionapaul and a happy customer, to date, of Northern Rock. The following quote comes from today's Time Online article headlined: Worst crisis for 20 years, say banks

http://business.timesonline.co.uk/t...ectors/banking_and_finance/article2412740.ece

"The crisis is having a huge impact on the way banks conduct their business. Northern Rock, the troubled bank, is facing a battle to raise up to £3 billion in funding it needs from the debt markets in the next three months.
Northern Rock has been particularly vulnerable because it relies on the credit markets for about 70% of the funds it needs to finance its aggressive mortgage lending. Some debt analysts believe that the bank may need to raise up to £8 billion if it is to sustain its ambitious targets and take mortgages that have been written several months ago off its balance sheet. There have also been suggestions that the funding pressures could force Northern Rock to issue a second profit warning. In June the bank said that £180m to £200m in income had been wiped out after it failed to pass on higher-than-expected borrowing costs to customers rapidly enough. Other banks, including Anglo Irish, another big user of securitisations, also face a credit squeeze."

I think we just need to keep an eye on things, or am I not being prudent enough?
 
The share price is still in freefall, lost almost 5% today.

Is it a case of worries about how they raise funds or something more sinister?
 
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