...Less than a month after they threatened to sue all of Fleet Street and said that they were 'One of the Strongest Financial Institutions in the World" (I didn't believe it then and I don't now, but some have joined my opinion...) http://www.guardian.co.uk/business/2008/apr/29/hbosbusiness.creditcrunch HBOS drifts into perilous waters
This article appeared in
the Guardian on
Tuesday April 29 2008 on p25 of the
Financial section. It was last updated at 00:04 on April 29 2008.
Have another look at HBOS's results for 2007, announced only two months ago.
Andy Hornby, the chief executive, described the balance sheet as "strong". The same adjective was applied to the flow of wholesale funding to the group. This, we were told, would provide "the necessary flexibility to operate in these challenging markets". As for write-downs, there was little to report - just £227m of fair-value adjustments that were "expected to reverse over time". The breezy confidence was expressed in the 18% increase in the dividend.
That is hard to square with what is expected to arrive today: £3bn of asset write-downs and a rights issue to raise £4bn. If HBOS shies away from the cash call at the eleventh hour, it is likely instead to signal disposals of non-banking businesses.
Either way, it is quite a turnaround. The write-downs should be deeply embarrassing. HBOS has minimal operations in the US yet, at last count, had £7bn of Alt-A mortgages, which are not sub-prime but are below investment grade, and £6.6bn of collateralised debt obligations. Exposures of that size require an explanation. The bank, in its hunt for ready pools of capital, seems to have travelled a long way from safety.
Hornby's critics, who say he is more a marketing man than a banker, will not be impressed. HBOS, it seems, was sucked into an arena it didn't understand.