BANKING & INSURANCEHBOS at the eye of storm blowing from the US after Lehman collapseMORE than £5 billion was slashed from the market value of HBOS yesterday, as the bank was plunged into the centre of the bankin
g fallout which spread to the UK from America (
Scotsman). HBOS's latest woes came as City experts rejected claims that the collapse of Lehman Brothers and the takeover of Merrill Lynch by Bank of America would be the catalyst for further banking consolidation. HBOS's shares' tailspin was part of more than £50bn wiped off the value of blue-chip stocks yesterday.At one point, HBOS slumped 36 per cent to 181.7p, an all-time intra-day trading low and a £5bn drop in its value. The shares later recovered to close down 17.6 per cent, or 49.5p, at 232.5p, wiping £2.6bn from Friday's closing market capitalisation. HBOS's price compares with 730p at the start of the year, and a rights issue price earlier this summer of 275p. By comparison, RBS dropped by more than 12 per cent, wiping nearly £4bn from its value. At its lowest point yesterday £6.4bn was lost from RBS's market capitalisation.
Downgrades deepen AIG woesAIG, the troubled insurer that sits at the heart of the financial system, on Monday had its key credit ratings cut, potentially triggering billions of dollars of collateral payments on its many derivatives trades (
FT). The ratings cuts come after US authorities moved to fight this latest fire in the crisis on Wall Street, throwing a $20bn lifeline to AIG while convening a fresh set of emergency talks at the Federal Reserve in New York to find potential sources of funds for the insurer. The ratings cut by Standard & Poor's, which downgraded AIG's long-term credit rating to A minus from AA minus late in New York on Monday, reflects the large losses AIG is expected to make on mortgage-related investments and credit derivatives. S&P warned the insurer could face further ratings cuts - perhaps even into the lower BBB category - unless it is able to "implement further liquidity options" and "the successful sale of at least a portion of its business assets".
Read all today's banking news from scotsman.comECONOMYCentral banks inject much-needed billionsMAJOR European central banks yesterday pumped billions in short-term credit into the financial system in an effort to shore up confidence in the aftermath Lehman Brother's bankruptcy (
Scotsman). The European Central Bank said its one-day tender of 30 billion (£24bn) with a bid rate of 4.25 per cent, received 51 bids for 90.3bn – three times the amount on offer, a clear sign that banks were craving ready money. ECB president Jean-Claude Trichet said: "It is an ongoing process and we have to remain extraordinarily alert. It is an ongoing market correction with episodes of high level of volatility." Trichet declined to comment on Lehman Brothers, but the bank, which oversees monetary policy for the 15 countries that use the euro, released a brief statement yesterday morning saying that it continued "to closely monitor" conditions in the euro area money market. The Bank of England made a similar move, offering £5bn in a three-day auction that drew bids for £24.1bn, or nearly five times the amount that was available. The Zurich-based Swiss National Bank said it was also providing liquidity in "a generous and flexible manner" at an overnight rate of 1.9 per cent, but would not say how much was on offer.
Read all today's economics news from scotsman.comINDUSTRYEnnstone issues profits warning as weather dampens demandTERRIBLE Scottish summer weather forced roadstone and building material group Ennstone to issue a profits warning yesterday and to accelerate efforts to sell parts of the business to cope with a cash drought (
Herald). Ennstone is part of the Bear Scotland consortium that maintains trunk roads in north-east and south-east Scotland. It also has extensive quarrying and concrete production operations, particularly in the north of Scotland. The company blamed "severe weather" in Scotland and falling profit margins from its English operations, as the property market foundered, for its woes. Ennstone's shares fell 35.5% yesterday to 10p. A year ago they were trading at 45p.
ProStrakan given green light in USPROSTRAKAN yesterday wrote to 67 sales representatives in the US with formal job offers after the company finally received approval to launch its anti-nausea patch Sancuso in America (
Scotsman). Chief executive Wilson Totten said yesterday's clearance by the US authorities was "a time for celebration". He forecast that the firm would be in the black by 2010. Yesterday's approval was expected in May, but has been delayed four times by the US Food & Drug Administration, which has suffered staffing problems. Sancuso is a skin-patch treatment designed to alleviate nausea experienced by many chemotherapy patients.While the drug will appeal to a relatively small niche market, ProStrakan believes that it could one day give it sales of $100 million (£55.9m). Analysts were yesterday predicting sales should reach £45m by 2013.
Read all today's industry news from scotsman.comRETAILTragus chains hit by consumer slowdownFURTHER evidence of a slowdown in consumer spending emerged yesterday as the owner of the Bella Italia and Café Rouge chains reported weaker sales growth (
Scotsman). Although Tragus posted a 56 per cent jump in annual earnings, it warned that sales growth had slowed to 3.4 per cent on a like-for-like basis from the 10 per cent seen the previous year amid a more "challenging consumer environment". Tragus is hoping that its diversity will help it through the economic malaise. It plans to offset soaring costs by renegotiating supplier contracts and updating its menus. Underlying earnings leapt to £44m in the year to 25 May, up from £28.2m last time, boosted by acquisitions and openings. Annual turnover at the Strada group rose 39.4 per cent, while Bella Italia sales increased by 20.6 per cent and Café Rouge by 14.7 per cent
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