Personal Insolvencies At Five-Year Low

Personal insolvencies have dropped to their lowest level in five years despite the tough economy, according to official figures.

There were 25,006 individual insolvencies across England and Wales in the first three months of 2013, the figures have shown.

It marks the lowest level recorded since the first quarter of 2008, the Insolvency Service said.

The statistics show a 1.8% drop on the previous quarter and a 12.9% fall compared with the same period a year ago - within the figure, bankruptcies hit their lowest level since winter 2002.

Bankruptcy orders plummeted by 27% year-on-year, with 6,663 in the first quarter of this year.

Bankruptcies have generally been falling back since the introduction of debt relief orders (DROs) in 2009.

DROs are are often dubbed "bankruptcy light" and are aimed at people with lower levels of debt but no realistic prospect of paying it off. They have been running at higher numbers than bankruptcy orders since last summer.

The latest figures showed there were 7,219 DROs in the first quarter of this year, marking a small drop on the previous quarter and a 9% fall compared with a year ago.

Individual voluntary arrangements (IVAs), which are agreements which involve sharing money out between creditors, were the only type of personal insolvency to see an increase on the previous three months.

Some 11,124 IVAs have been recorded this year so far, which is a 1.3% rise on the quarter but still 5% lower than a year ago.

The figures show signs of further improvements in people's ability to manage their finances, after last year's figures showed that personal insolvencies dropped to their lowest annual levels since 2008.

Continued low interest rates have helped to ease some borrowers' costs and unemployment has not risen to the levels some had feared.

However, the official figures do not show the full extent of people struggling with debt.

Analysts have warned that many people are still trying to "muddle through" the tough economy and they remain under pressure from soaring rents, high energy bills and a tough jobs market.

Welfare reforms will also mean more low-income families will have very tight budgets to balance this year, experts have warned.

Charles Turner, president of the Insolvency Practitioners Association (IPA), said: "The figures released this morning do not in my opinion reflect the reality of life for a great number of consumers who are undoubtedly struggling as wage growth flat-lines and their household costs continue to increase.

"The reason for this is that bankruptcies are an expensive bureaucratic process which provide poor returns for creditors and so are less favoured as a solution.

"Debt relief orders are down but that is because they are only appropriate for a minority of individuals due to the cap of £15,000 on total liabilities."

Mr Turner suggested that the slight rise in IVAs could be because they often "provide a more commercially viable outcome for both the debtor and creditors".

He said he has seen evidence that debt management plans, which are not included in the figures because they are an informal process, have "grown significantly", partly because they are seen as more cost-effective.

He added: "The harsh reality is that many people are still struggling on, trying to make ends meet."

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RBS Returns To Profit In Latest Quarter

Opinion: Investment Banking's Worth It

Updated: 10:30am UK, Friday 03 May 2013

By David Buik, Panmure Gordon & Co

The moment that Barclays' Rich Ricci's Champagne Fever charged up the Cheltenham hill on March 12 to take the opener at the festival, I had that feeling that this would be the last time we would see Mr Ricci in that flamboyant tweed suit, as head of investment banking - he is the last vestige of the Diamond era.

The subsequent news of his bonus announced on Budget Day was the overriding evidence required that the change in Barclays' culture, promised by Messrs Walker and Jenkins, was finally being implemented.

However sometimes I feel that commentators on banking have been living on Planet Zog. Ill-informed comment such as 'casino banking' caused the capitulation of the banking sector, is just plain arrant nonsense.

It is generally acknowledged that in paying circa £26bn for ABN AMRO, RBS had bought a 'pup'. Apart from that injudicious and reckless venture, there is no evidence that investment banking triggered the banking crash of 2008, unlike the sub-prime lending efforts in the US, where investment banking played a matinee idol's role.

The UK's problems emanated from poor credit assessment which saw Northern Rock, Bradford and Bingley and HBOS collapse like a pack of cards. Also, the merger between Lloyds and HBOS was cobbled together unnecessarily with indecent haste towards due diligence. Our problems in London were exacerbated by bank balance sheets growing by gargantuan proportions with inadequate regulation.

Without any doubt at all, had Barclays Capital not contributed, apart from one year, between 50-60% of the bank's profits plus a capital injection from Qatar the 'Bald Eagle' would also have been at the behest of the taxpayer.

The public at large may not have liked the cut of Bob Diamond's jib nor the disproportionate bonuses paid. Nonetheless Barclays was a successful 'mover and shaker' in global investment banking. We should also remember that had Steve Ashley's RBS Treasury team not contributed about £9bn to profits in 2008-9 RBS would be in a very parlous state, rather than parlous.

Though some of the responsibility for Libor transgressions has been laid at the feet of investment banking, most of it and that of the huge fines and repayments made on PPI miss-selling are down to general and consumer banking.

Also, let's not conveniently forget the fines for inadequate money-laundering controls incurred by HSBC and Standard Chartered. Barclays' investment banking recently posted a profit of £1.3bn out of £1.8bn - hardly shabby.

Lloyds Banking Group posted much better than expected pre-tax profits of £1.92bn. Lloyds's continued recovery is hugely reliant on the performance of the UK's economy.

Impairment charges were cut from £1.6bn to £1bn. There is no guarantee that this trend will continue.

RBS posted its first net profit of £393m. Impairments are again down by a third to £1.03bn. Much has been achieved in the last few years.

The balance sheet is down by £900bn since 2009. RBS has ammunition to lend to SMEs. However the UK economy is still brittle; so any talk of privatising Lloyds and RBS before 2015 may be precipitous.

Next week HSBC and Standard Chartered post their interim results. Their respective results will be buoyed by significant overseas earnings and in the case of HSBC, also by investment banking revenues.

The failure by Lloyds to sell its 632 branches to the Co-op, following in the wake of Santander jilting RBS at the altar last year will come as disappointment to the Chancellor and Business Secretary Vince Cable, but as no surprise to observers in the City.

The threat of draconian EU regulation creates black cumuli nimbus clouds over the UK's banking sector. We also all understand the need for greater capital requirements. Capital would be much easier to raise without the EU sitting over London like the Sword of Damocles Also more upbeat sentiments from our political masters would be constructive.

Whilst banking competition on the high street is a laudable aspiration, getting the correct regulation of UK banks is even more important.

Though we look forward to Mark Carney's arrival at the Bank of England, he is only human and has just blood in his veins. We should not split our banks up, as Dr Cable and Sir Mervyn King would have us do. Implementing a 'split of assets' will seriously damage London's ability to remain at the head of global finance.

We understand Antony Jenkins's rationale for changing the culture of Barclays. We just hope that Barclays has not thrown the baby out with the bath water by attempting to put investment banking on the back burner!

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Euro Forecast: Jobless Total To Stay Static

Unemployment levels are not expected to reduce significantly in any key eurozone nation during 2014, according to new forecasts released by the European Commission.

Recession in 2013 in the eurozone will be worse than expected, with GDP slipping 0.4% against a previous forecast of -0.3%.

The commission's spring forecast showed the situation improving however in 2014 in the nations sharing the euro, with growth at 1.2%, slightly less than forecast in February.

But France and Italy are both expected to see jobless numbers rise next year, it said.

However Spain is set to see dole queues drop by 0.6% while Greece's are expected to reduce by 1%, the commission added.

Meanwhile Germany, which is Europe's biggest economy, has been forecast to see a drop of just 0.1% in its jobless, down to 5.3%.

Across the 17-nation eurozone the commission said it expected the unemployed total to also ease by 0.1% in 2014, to 12.1%.

The commission said that in total across the whole 27 nations of the EU, which includes Britain, unemployment would remain static at 11.1% in both 2013 and 2014.

The commission warned that Cyprus, which has just gone through a major banking crisis, would head into a sharp recession.

It said GDP would contract in Cyprus in 2013-14 by 12.6%.

The forecasts come a day after the European Central Bank cut its base rate to an historic low of 0.5%.

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Warren Buffett Makes Twitter Debut

Warren Buffett, the world's most famous investor, has joined Twitter and picked up 262,000 followers in his first 18 hours.

The 82-year-old 'Oracle of Omaha' announced his debut on the site by simply tweeting: "Warren is in the house."

His second tweet from the @WarrenBuffett account was a link to an article on "why women are key to America's prosperity".

So far, Mr Buffett has not followed any other Twitter users.

The move is being billed as the first social media event for the notoriously technology-averse billionaire.

Mr Buffett is the primary shareholder and CEO of Berkshire Hathaway, which has interests in a range of companies and earlier this year was part of a group that bought out food giant Heinz.

His renowned investment foresight has seen him become one of the world's most famous business figures - and one of the wealthiest.

Forbes rates Mr Buffett as the world's fourth richest person, with $53.5bn (£34.4bn).

His philanthropic efforts are also well documented and he is estimated to have given away more than $17bn (£11bn) to good causes, including to the Gates Foundation.

Microsoft co-founder Bill Gates retweeted his friend's opening tweet and also posted a picture of the pair playing bridge together.

Mr Buffett's entry into the social media world comes shortly after former US President Bill Clinton joined the service last month.

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Barclays: Bob Diamond Breaks His Silence

Former Barclays boss Bob Diamond, who resigned in the wake of last year's Libor scandal, is reportedly planning a new merchant bank to operate in Africa and Europe.

According to the New York Times, American-born Mr Diamond has been speaking to investors across the world, with plans to buy stakes in businesses in Africa - where he expects future growth to be substantial.

The paper said: "And his other thesis is that Europe's banking system is going to be dismantled, so opportunities to buy pieces on the cheap will be abundant."

Mr Diamond, 61, also told the New York Times he did not know the mechanics of the interbank lending rate, until just before Barclays was fined £290m for rate manipulation.

He said: "If you asked me who at Barclays submitted the rate every day I wouldn't be able to tell you.

"(But) I bet you if you asked any chief executive of any bank on the street, they would give you the same answer."

Mr Diamond resigned in early July after Bank of England governor Sir Mervyn King apparently lost trust in the Barclays boss.

Mr Diamond was grilled by MPs over his bank's culture

The then chairman of Barclays, Marcus Agius, told MPs that Mr Diamond "was not in a good place" before he resigned over the rate-fix scandal.

He left the firm with his £2m annual salary and pension but waived a bonus worth up to £20m.

Mr Diamond, who was photographed by the US newspaper commuting on a New York train without an entourage to his modest office in Brooklyn, admitted it was still difficult to accept he was forced out of the job.

He said: "It's hard for me to talk about it - I've tried to move on."

The newspaper said Mr Diamond now lives in a 40th-floor penthouse overlooking Manhattan's Central Park, with singer Sting as a neighbour.

It said he bought the $37m (£24m) property through a Russian-sounding shelf company to avoid adverse publicity on the purchase.

The newspaper added that Mr Diamond also has holiday homes in Colorado and on the eastern seaboard in Nantucket.

"But we don't have a boat, we don't have fancy cars. I think we have lived well, but it hasn't been about accumulation or anything like that," he said.

Mr Diamond said: "I never did anything for money. I never set money as a goal. It was a result.

"And if you look at how (my wife) and I and our three kids have lived our lives, as soon as we had any money at all, we created a family foundation.

"The only car I own, honestly, is an 11-year-old Jeep on Nantucket."

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The Sky News Business Round-Up And Look Ahead

Sky's Naomi Kerbel offers a look ahead to what's coming up in the week's business news.

:: Monday 6th May

UK bank holiday

:: Tuesday 7th May

HSBC Q1 results

:: Wednesday 8th May

J Sainsbury Q1 results

:: Thursday 9th May

UK interest rate decision

:: Friday 10th May

G7 finance ministers and central bank governors summit

Related Stories

RBS Returns To Profit In Latest Quarter

Warren Buffett Makes Twitter Debut

Personal Insolvencies At Five-Year Low

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US Creates 165,000 New Jobs In April

The United States created 165,000 new non-farm jobs in April, with the figure beating expectations.

Hiring was much stronger in the previous two months than first thought, and the gains trimmed the unemployment rate to a four-year low of 7.5%, the official figures showed.

The Department of Labour report showed the job market is improving despite higher taxes and government spending cuts.

In addition to the April gains, the government said employers added 138,000 jobs in March and 332,000 in February. That is 114,000 more over the two months than was originally estimated.

The economy has created an average of 208,000 jobs a month from November through April, which is above the 138,000 added in the previous six months.

John Silvia, chief economist at Wells Fargo, said: "This is a good report. There's a lot of strength.

"It's good for the economy. It's good for people's income."

The stronger job growth suggests that the federal budget cutting "does not mean recession," Mr Silvia said. "It does not mean a dramatic slowdown."

The release of the figures in the US came with certain drama after a fire overnight at the department's headquarters shut down the building for most employees.

Members of the media were allowed in for the release of the report.

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Smartphones: Debit Cards Of The Future?

By Liz Lane, Sky News Reporter

Smartphones could soon become an even greater part of our lives as networks join forces to let us pay for high street goods with our mobiles.

The battle to dominate the market for "virtual wallets" is heating up, but with it come concerns about how thieves and fraudsters could take advantage.

Britain's big-three mobile networks - EE, Vodafone and O2 - are creating an opt-in service that will allow all bank, credit and loyalty card details to be stored on a phone SIM.

The customer will be able to swipe it on a card reader in a shop and instantly pay for goods.

David Sear, chief executive of Weve, the company managing the project, said: "You'll be able to pick up your goods from the counter - your sandwich or whatever it might be, on a small transaction - and simply swipe your phone, rather than having to get your card out of your wallet."

He is hoping to get retailers to sign up later this year, with the promise of advertising opportunities.

Stores will be able to send special offer alerts to customers' phones as they walk past in an effort to tempt them in.

Google, Barclays, Mastercard and Paypal have all come up with their own versions of the virtual wallet, but they have not caught on in the UK.

The contactless payment market as a whole has yet to take off, with only 6% of people in the UK having made such a transaction with a credit or debit card.

Bryan Glick, editor of Computer Weekly Magazine, describes it as a chicken and egg situation.

He said: "Retailers aren't going to offer this as a means of paying unless they know they're going to use it, but people aren't going to use it unless they know there are a lot of retailers they can use it at."

As for security, the new system will have a limit on how much can be spent on a phone without entering a Pin code.

However, cyber security expert Jason Hart said he would take further precautions before using it - including having his smartphone, and the payment system itself, password-protected.

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US Giant HCP Swoops On Barchester Healthcare

By Mark Kleinman, City Editor

A giant of the American healthcare industry has teamed up with the former owner of Southern Cross, the collapsed care-home group, to take control of the debts of another of Britain's biggest private operators.

I have learnt that HCP, which has a market value of more than $24bn, has swooped to buy 30% of the junior debt of Barchester Healthcare, which employs more than 17,000 people at over 200 locations across the UK.

The deal, which was finalised this week, involved HCP acquiring roughly £175m of the borrowings of Barchester's property empire.

It bought the debt at a discount from a vehicle called Isobel, which is a joint venture between Royal Bank of Scotland (RBS) and Blackstone, the buyout firm.

Blackstone, which sold out of Southern Cross several years before its collapse led to a political outcry in 2011, has separately bought just over 20% of the Barchester property company's junior debt from Lloyds Banking Group, the other state-backed UK lender.

The private equity group and HCP are understood to be working together on achieving a consensual restructuring of Barchester's £1.5bn debt mountain ahead of a deadline this autumn.

Barchester's board is understood to be pleased with HCP's move because of its reputation in the US industry, insiders said today. Earlier this year, HCP, which is structured as a tax-efficient real estate investment trust (REIT), bought a big position in the debts of Four Seasons Healthcare, another British firm.

Barchester's homes have about 10,000 residents, and is well-known in the City for being partly-owned by the racing tycoons John Magnier and JP McManus, who were instrumental players in the takeover of Manchester United eight years ago.

Like many healthcare companies with substantial property assets, Barchester's debt problems began during the boom when its real estate and operating companies were separated.

Unlike at Southern Cross, however, the care homes would not be impacted even if the property arm was unable to repay its debts because the two are ring-fenced from one another.

Southern Cross was at one point Britain's biggest care-home operator with 750 sites but ran into financial difficulties and eventually collapsed in 2011.

Barchester, Blackstone, Lloyds and RBS all declined to comment.

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Sainsbury's To Bank On Lloyds Buyout

By Mark Kleinman, City Editor

The supermarket chain J Sainsbury will next week move to take full control of its banking operations by striking a deal to buy out its partner, Lloyds Banking Group.

I have learnt that Sainsbury's is on the verge of an agreement with Lloyds that is expected to cost it several hundred million pounds.

Insiders said that a deal was likely to be announced alongside the retailer's full-year results on Wednesday.

Sainsbury's is understood to have been keen to acquire full control of the joint venture, called Sainsbury's Bank, for some time. Buying the Lloyds shareholding will allow it greater freedom to develop and market new banking products and services.

Launched in 1997, Sainsbury's Bank has 1.4 million active customers, according to the company. The business offers insurance, loans and savings products.

Supermarkets including Tesco and Sainsbury's have bold ambitions to take on the major high street banks.

They believe there is an opportunity to do so because of growing consumer mistrust of the industry's dominant players, fuelled by the banking crisis and the emergence of subsequent mis-selling scandals.

Tesco plans to launch current accounts within the next year, while Marks & Spencer has also been trialling the provision of banking services in some of its shops.

In 2008, Tesco struck a deal similar to the one planned by Sainsbury's, which involved it paying £950m to acquire the 50% stake in its personal finance arm from Royal Bank of Scotland.

People close to the talks between Sainsbury's and Lloyds said that various commercial and service agreements would continue to exist between them following next week's deal.

Sainsbury's Bank is run by Peter Griffiths, the former head of the Principality Building Society, who was appointed to the role last November.

The sale of its stake in Sainsbury's Bank should benefit Lloyds, which is 41%-owned by taxpayers, by bolstering its capital base at a time when regulators are forcing British banks to augment the amount of capital they hold in reserve.

Lloyds is also examining the sale of Scottish Widows Investment Partnership, the fund management arm of its insurance business, as well as a stake in its international wealth management operations.

The joint venture with Sainsbury's is one of many legacy holdings taken on by Lloyds after its rescue of HBOS, the mortgage lender which came close to collapse in the autumn of 2008.

Lloyds declined to comment, while Sainsbury's said it did not comment on speculation.

The supermarket chain does not plan to update the City next week about the future of Justin King, its chief executive, following Sky News' disclosure last month that its board has hired headhunters to work on succession planning for the role.

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