CITY AND SUBURBAN
Let's sell mortgages, and if our bank goes phut we'll sell it to the Bank of England
CHRISTOPHER FILDES
Now here's a great business idea. Let's sell mortgages. Look at all those sleepy building societies and banks with all their costly branches — we can run rings round them. We'll do it all from one downtown office, modern technology, minimum fuss, our customers need only make one phone call — it's a winner, it's a breakthrough! We'll call it National Home Loans or National Mortgage Bank, and if it goes phut we can always sell it to the Bank of England. No, hang on a moment, I seem to remem- ber„ . . Just now selling mortgages looks a great business to any number of lenders. They are falling over themselves and each other to get the money out, offering come- ons, financing carpets, happy when borrow- ers ask for more as house prices go rocketing up. Their regulator in chief, Howard Davies, has called them imprudent. Perhaps he can remember what happened to National Home Loans and National Mortgage Bank last time. It is a salutary story. They were crea- tures of the last great boom in house prices, a dozen years ago. NHL had the office, the phones, the technology, and came from nowhere to be the second biggest of the new breed of centralised mortgage lenders. It could not shovel the money out fast enough. NMB was its subsidiary, and specialised in lending to borrowers no one else wanted. Pubs, nursing homes, prep schools could mortgage their property to it and keep going. Leasing was another of its businesses — any- thing from buses to photocopiers, which tended to disappear, along with the money and the customers. Its second mortgages let people cash in on rising house prices and spend the money on weddings or holidays: equity withdrawal, this is now called. Then house prices turned turtle, and then the Bank of Cocaine and Colombia failed and set other banks tottering, NMB among them.
Dear at a pound
THIS was how the Bank of England got into the mortgage business. Not wanting to see the City's banks come tumbling down like dominoes, it arranged lines of credit for eight of them, with NMB's line much the biggest. Then it took the line on to its own books, and then it bought NMB for a nominal pound and asked the versatile Ian Hay Davison to come in as chairman and tidy things up. Even at £1, it was overpriced. The Bank was in for £113 million and Mr Davison got that expo- sure down by half. The rest, and the £75 mil- lion which was NMB's original capital, are lost and gone for ever. Under new manage- ment, NMB charged high rates for its mort- gages to encourage its customers to go away, and enough of them have now taken the hint for what remains of the business to be saleable. Nikko Principal Investments of Japan is buying it and the Bank of England is left to reflect that owning a mortgage bank can be expensive. Could it all happen again? Howard Davies plainly thinks so, and I expect that it is happening already. Come the day, I shall sell my house at the top of the market, for cash, and move into the Ritz.
Very lastminute
SAUNTERING to market this week is last- minute, most stylish of the dot.com stocks. Martha Lane Fox, whose baby this is, has been charming City editors across the lunch tables, doubtless reserved at the very last moment on favourable terms. This is last- minute's idea. It will let restaurants and theatres and airlines sell off their last few free places at clearance-sale prices. Last- minute will not be priced like that. The talking figure is £400 million, though its revenues are modest and its profits, as yet, non-existent. You have to buy the idea. I grumpily wonder how many customers will be content to take last-minute chances, and how many of them will use lastminute when they do. The Internet, so we are constantly told, is making markets transparent and will certainly enable us to trawl around for cheaper air fares without waiting to see what lastminute comes up with. If you are thinking of buying the shares, leave it late and hope for a price cut.
Boondoggle boat race
THE Grand International Boondoggle Handicap is now looking less like a horse race and more like a boat race. The prize is the top job in the International Monetary Fund, it has always gone to a European, we now have a German candidate backed by the European Union, but Caio Koch-Weser's main qualification is his 25-year stint at the World Bank. This is a bit like proposing a long-serving housemaster from a rugger- playing school as headmaster of Winchester. The Germans, though, have at last woken up to the way that the French farm these jobs for themselves. (They have farmed the IMF for all but five of the last 37 years.) So Ger- many backed Tony Blair's man for Nato and can now collect the pay-off, and Jean-Claude Trichet of the Banque de France may have to settle for the European Central Bank. Stanley Fischer, the capable deputy minding the shop at the IMF, carries two penalties as an American who disagrees with Larry Sum- mers at the US Treasury about how this shop should be managed — but was born in Rhodesia and is being backed by Zimbabwe. The Japanese are backing Eisuke (Mr Yen) Sakakibara, if only as a reminder that they and he are still there. The Americans are pointedly not backing Mr Koch-Weser. The IMF, if it needs anyone, needs a reformer, but that is not the way that these boondoggle races are run.
One for the Mirror
EMERGING markets are, by definition, the markets that you can't emerge from, but one or two have still to surface: North Korea, for instance, or Cuba. Watching for its opportunities is Beta Gran Caribe, whose accounts drift on to my desk with a powdery thud, like cigar ash. Its mission is to invest in Cuba or to get as close as it can. Thus, it holds a stake in Africub (Bahamas), based at the Marina Tarara, with a concession over more than 80 target wrecks. Beta Gran Caribe is a Guernsey company, listed in Dublin, accounting in Swiss francs and probably out of bounds to American investors. The share price has edged up,' reports the chairman, Peter Scott, 'but is still low and more work needs to be done to get the messages across. Comments will be gratefully received. The reward: a cruise around Havana in a ice- blue '59 Chevy Impala. No dividend is pro- posed. Come and see us soon.' I confidently expect to see these shares tipped to the guileless readers of the Daily Mirror.
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