Worsening mortgage arrears revealed by Northern Rock

Article source: William Lyons - scotlandonsunday.scotsman.com

Worsening mortgage arrears revealed by Northern Rock

After experiencing one of the most turbulent weeks on record, with panic selling clearing £2.7 trillion off the value of global shares, it is very possible to forget that business will be conducted as per usual this week.

Northern Rock, the nationalised mortgage lender, will report its recent figures on Tuesday against the setting of a steadily declining housing market. During the first two quarters of 2008, when the bank went public, it incurred losses of over half a billion pounds. Its debt provisions stood at £351.9millon based on over one percent of its mortgage book falling more than three months behind in arrears.

But its savings business which has proved popular, given that it is 100% protected against losses by the Government, had been forced to withdraw some of its products as it was nearing over subscription. The Rock, due to its unique status as a nationalised bank can only hold up to 1.5% of total deposits held in the United Kingdom.

Dairy milk maker Cadbury’s is like likely to release positive trading results as the lower commodity prices have helped to ease pressure on its operations. In July, when the company announced 46% jump in its profits said that it would “take what ever measures necessary” to tackle the rise in commodity prices head on.

Bellway’s full year results will mark the end of a season of miserable results. In August the builder announced a 45% fall in the volume of transactions for the six trading months to July 31. It said that efforts to foster higher volumes of sales were likely to reveal a drop in full year profit by up to 3%.

The firm said that the cancellation rates had elevated to “unprecedented levels” in the summer season with trading failing to get better since their last year end.

The Consensus report showed a 31 percent fall in profits which will stand at around £161.3m for their last trading year and a further drop in earnings in the current year.

The previous month, Whitbred, the owner of Premier Inn, has remained strong and analysts in the City are anticipating that this will continue when the group announces its interim results on Tuesday.

Last month Whitbread’s budget hotel posted a very healthy 10.2% growth for sales in the 24 weeks to august the 14th 2008 when compared with the same time last year; this is because corporate customers have begun to turn to cheaper lodgings to save money. Business customers now make up 60% of the chain’s total revenues.

Sales at the hotel chain have fallen slowed since the rise of over 10 percent in the first quarter, but Whitbread said that its efforts to introduce lower price foods at its restaurant arm saw like for like sales by quarter rise by 4.4% from 3.5% in the first quarter. The black sheep of the operation is currently Costa Coffee which saw a drop in sales growth to 3.7% against 6% in the first quarter.

Analysts are predicting that pre tax profits will rise to £119 million for the six months up to September 30; the comparables last year were £99.4 million.

The Luxury fashion house Burberry has been strong when compared to its clothing counterparts and has largely remained unscathed. These update on Tuesday will prove if the figures match our expectations. The firm, known for its trade mark branded clothing has so far avoided any drop in consumer spending trend. Recent sales figures show that their client base is continuing to spend with no real signs of letting up.

The luxury goods market overall has seen an increase of 8 percent in like for like sales. Much of this has been put down to the rising price of the crude, leading to the oil producing companies becoming increasingly richer.