Repossessions: Downward spiral

Gary Duncan

The leap in the number of people losing their homes through mortgage repossessions in the first half of this year is an ominous sign of much worse to come on this front and on the housing market slump.

More repossessions aggravate the danger that the residential property market will be drawn into a vicious downward spiral. As more lenders seize back properties from borrowers who have defaulted or sunk into arrears on their loans, the supply of unsold homes on the market will pile up at a time when demand from wary buyers is sliding fast.

Many of the repossessed properties will be sold for less than a fair-market value by lenders eager to clear the debt. The fallout will spell even more severe downward pressure on house prices that are already plummeting at a record rate.

Worse, there is clear evidence that lenders are proving more aggressive over seizing homes now than they were - a consequence of the financial strains that they are under, thanks to the credit crunch.

Ed Stansfield, of Capital Economics, notes that at the start of 2004, the number of properties repossessed amounted to about a tenth of the number of mortgages on which borrowers were at least six months behind with repayments. In the latest figure, the comparative figure is 28 per cent, or nearly three times as high.

This trend partly reflects the uncertain and hard-to-pin-down scale of US-style sub-prime lending that may have taken place to unworthy borrowers. But it may also reflect an excessively tough stance by some hard-pressed lenders that, ultimately, may prove self-defeating.

By behaving in this way some of these institutions may be inflicting unnecessary misery on families in straitened times and exacerbating the housing slump in a way that will risk deepening their own business difficulties.

RBS: Over the worst?

Christine Seib

A canny company welcomes unduly pessimistic forecasts of its profits or lack thereof, so Royal Bank of Scotland (RBS) was unlikely to have been unhappy with analysts' predictions that it was heading for Britain's biggest banking loss. Compared with a possible loss of £1.7 billion, as had been suggested, today's £692 million slide into the red looks better than it might have.

RBS's timing has also been good. When other banks were wavering over whether to ask for cash, RBS went big and bold with a £12 billion capital-raising. This meant that it could give the market ample notice of its writedowns, allowing today's £5.6 billion charge to have been digested well ahead of the interim figures.

The bank has been one of the toughest markers in the sector of its own investments, so the worst news may now be out there with regard to its structured credit book. Plus, as the final bank to report its interims, RBS has the benefit of the dire warnings given by its rivals to prepare the market.

The bank has done what it needed to do - provide some good news for investors on the ABN Amro synergies. And it has ensured that it sounds suitably sorry about the loss, something that would not have been a given from Sir Fred Goodwin in the past. There will undoubtedly be continued grumbling about the chief executive but he is remains the best person to integrate ABN. Today's figures are likely to be enough to give him breathing space.

Blinkx: Video star

Lilly Peel

Blinkx, the AIM-listed online video search engine, may still be a tiddler in the world of search engine giants, but its latest moves have seen it snapping at the heels of Google and Yahoo.

With five million searches a day, it recently outstripped Google Video in Britain – an impressive feat for a company that is little more than a year old.

It boasts 26 million hours of video and more than 350 partners around the world, including Channel 4, the BBC and YouTube.

Blinkx's revenue comes from sharing any advertising revenue generated by a site when it displays a clip found by Blinkx's engine.

Suranga Chandratillake, the group’s founder and chief executive, is determined to expand and believes he has found a shortcut. Today the company said it had made an initial approach to buy Miva, the US search-based ad network, for $41 million.

The fit would be good: Miva has the internet traffic Blinkx wants (it is predicted to generate $140 million in ad revenue this year compared with $17 million forecast for Blinkx) but the UK company has the advanced technology it needs.

It is an opportunistic bid. Miva's shares have fallen almost 90 per cent in the last year, partly because of its underinvestment in technology.

Where Blinkx differs to other companies is that rather than just searching titles of videos, it is able to “listen” to clips using its unique technology, which converts speech into text. This means better quality searches for consumers but also more targeted, and therefore more valuable, advertising for companies. It also tracks ads and can tells companies how many people have clicked on them and whether they bought anything.

Blinkx’s shares were up 10.25 per cent, or 3p, at 32.25p,

This is more than double their value last month, when they fell to 15p, but the stock has fallen 36 per cent since the company’s IPO, at 45p, at the end of May last year.

The acquisition would be a coup for Blinkx and help its goal of breaking even by 2010, but it is early days and with Miva’s shares so low a counter offer cannot be ruled out.

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