UK Finance News

Tesco is close to completing a deal to buy out Royal Bank Of Scotland’s stake in their joint venture, Tesco Personal Finance.

The deal is expected to be worth £1bn and has been under negotiation since April when the bank announced that it would be putting up for sale some of it’s assets to bolster it’s balance sheet.

It will come as welcome news following the abortive efforts to offload the RBS insurance arm for £7bn, with interest waning as the economy declines. The RBS insurance business includes household names Churchill and Direct Line amongst others and attracted a lot of interest when it was decided to put the business out to auction.

However the big players have pulled out of the running, Zurich pulling out two weeks ago, leaving the only contender being the US insurance company Allstate.

RBS have always claimed that they would not be pushed into a sale for the insurance group and currently look set to shelve the idea of selling.

Sub Prime mortgage lender Edeus look to be a bit desperate to off load some of the mortgages on it’s books, having offered a discount to customers for early re payment.

Edeus have so far tested the water with 400 of it’s customers and interest from eligible customers is said to be 20% at this stage. The lender is offering a discount of 8% for repayment of the loan or moving to another lender. They are also waiving early redemption charges and exit fees.

Edeus was formed in 2006 to take advantage of the big profits to be made in the sub prime market and in it’s first year shifted £1.4bn of mortgages. The business was hit by the credit crunch at the end of last year.

With potential buyers now demanding big discounts, Edeus considers that the offer to customers is a better option than selling the loans to a financial institution.

Bank Of England governor Mervyn King has suggested that Banks should put ‘billions of pounds’ into a fund over the next ten years to prevent another Northern Rock disaster.

King told a meeting of the Commons Treasury select committee yesterday that banks should make “non-negligible contributions” into the Financial Services Compensation Scheme, adding that over ten years the fund would build up billions.

He added “I think it’s rather short-sighted that the banks shouldn’t put up money now, If you wait until there’s a problem, that’s a bad time to ask.”

King also suggested that the Bank Of England should have the power of deciding if a failing bank needed to be brought under the control of the authorities.

King said the central bank would have acted a lot sooner to save Northern Rock if the BoE had been given the power to use the proposed resolution scheme. “That bank would have been dealt with immediately,” he said. “We certainly would have handled it differently.”

UK Supermarket giant Asda has offered a crumb of comfort to the hard hit motorist by reducing the price of fuel on it’s forecourts by 3p per litre on unleaded and diesel.

The knock on effect swiftly saw supermarket competitor Morrisons follow suit, only their price cut is a saving of 4p per litre. Now Sainsbury’s have announced that their customers can save 5p per litre from Thursday, but only for customers spending £50 or more at their stores.

The Sainsbury’s promotion will be restricted to running for two weeks.

Asda and Morrisons say they are responding to the recent drop in oil prices, with the price settling at around $130 per barrel from the recent high of $147.

Asda trading director David Miles said: “We are seeing a more stable reduction in oil prices, allowing us to pass on the savings to customers.

“We urge other retailers to follow our lead at a time when customers need as much help as possible.”

Reports in this weekends press suggest that only around 10% of HBOS shareholders participated in the banks rights issue to raise £4billion.

Experts are concerned that the take up may be so bad that it will leave underwriters Morgan Stanley & Dresdner with as much as £3.6bn worth of the banks stock.

HBOS had hoped to rally support from it’s estimated 800,000 small private investors who were given around 200 shares each following the demutualisation of Halifax Building Society ten years ago.

While the offer made by HBOS may have looked attractive when it was announced in April, since then the share price has plunged in value. The hammering taken last week as UK banks in general were hit on the stock exchange, saw HBOS share drop to a low of 228p against the original discounted rights issue price of 275p.

The next few days could be crucial for the bank and it will be interesting to see how experts Morgan Stanley & Dresdner emerge from the farce.