The overall picture is blighted by the lack of clarity in exactly how banks carry out this important activity. Worth a mention because it is very easy to assume that such a major item as loan loss provisioning is largely carried out on an Ad Hoc basis throughout practically every bank in Europe. Add to this the subjective nature of provisioning in the first place and you may well wonder why it is even worthwhile doing any kind of analysis on major banks results. The principal question to ask is of course exactly how objective are each banks processes. As far as I am aware there is no standard way to assess provisions which is somewhat surprising given the importance of the content. In the alt fi world the subject is just as relevant but just as opaque.
This is useful article which points out some of the things which lenders should be looking for when financing property assets in the UK. In general this is aimed at the residential property market which, since lockdown was eased in July, has shown signs of considerable resilience. In fact residential property prices have soared and according to major property lenders Halifax and Nationwide have shown a rise of between 5% and 7.3% over the past year and mortgage approvals hit a 13 year high in August. This is however not the whole story as a number of other factors need to be taken into consideration and digital lenders will need to tweak their assumptions accordingly as these assets are often the security for Small Business Loans. Presumably the same situation exists all over Western European economies in one form or another. The major UK lenders seem to be affected by groupthink and are insisting on punitive levels of equity on any house purchase TSB is insisting on a minimum of 40% and other banks are withdrawing from certain parts of the market such as flats and new builds. There is almost nobody lending over 85% of valuation and this is prohibiting first time buyers which cascades upwards as more expensive properties are not selling. On top of this on line estate agencies are recording property sales which have not yet occurred and a lot of sales are falling through. This will ultimately have a negative affect on asset prices. Time to tread carefully.
There has been a lot of chat lately about infrastructure and how the construction of new schemes would be one way of raising the levels of activity in the UK. I therefore decided to have a look at the UK governments web site on infrastructure projects. It seems likely to me that the objectives being set by the government are a lot to do with diversity and inclusiveness but not a whole lot to do with getting the job done or how to do this in the most efficient way possible. It makes my blood boil when I think about how useless we are in the UK at anything approaching a successful project. HS2 is billions over budget and way behind schedule fails to solve all the problems and cannot even produce a coherent justification for the spend. The same goes for crossrail which is billions over budget and so far two years late with no end date set. It seems that political correctness is however a very high priority? God help us.
Howard Tolman is a well-known banker, technologist and entrepreneur in London,
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