With admirable bravado Sir Alastair insists that bankers will not be getting their pound of flesh It is difficult to see how

With admirable bravado, Sir Alastair insists that bankers will not be getting their pound of flesh It is difficult to see how he can avoid it, however. Bankers are certain to demand that at least an element of the interest they are being asked to forego be converted into equity. It is anyone’s guess what will be left for present shareholders once the process of dilution has been completed – possibly not a lot.. Union Bank of Switzerland (UBS) announced disappointing first-half results yesterday, which included a big leap in bad-debt provisions, reflecting the pain inflicted on Swiss small- and medium-sized business by the strong Swiss franc. The franc has appreciated more than the German mark this year. UBS had to increase the amount set aside for provisions, write-offs, value adjustments and depreciations in the first half of 1995 to SwFr902m (pounds 488m) from SwFr790m in the first half of 1994.
The Swiss bank said in a letter to shareholders it was “cautiously optimistic” for the full year after reporting a 10.4 per cent drop in group net profit to SwFr832m for the half.Although the bank does not break down figures for its extensive investment banking operations in London, the City operation appeared to do well. Trading income increased by 75 per cent to SwFr861, although this was compared with a poor figure in the first half of 1994.Trading contributed a fifth of total income against only a tenth last time, the letter said.

“Equity and bond trading revenues were substantially higher than in the previous year, but trading in interest rate instruments was unsatisfactory. Earnings from foreign exchange, bank note and precious metal trading matched the previous year’s level fairly exactly.”A spokeswoman for UBS said the main reason for the high level of provisions was the continued weakness in the property market in the French-speaking part of Switzerland. Swiss economists have revised downwards their growth forecasts due to a slowdown in the growth of key trading partners and the strong franc.The spokeswoman said a forecast of “cautious optimism” for 1995 in effect means the bank does not know whether its group net profit this year will be higher or lower than in 1994. “The final result will be determined by write-downs and provisions and that depends on economic developments in Switzerland,” she said. “The profits will also depend on financial markets, which should be better in the second half, but the decisive factor is provisions.” The spokeswoman added that if the Swiss economy continued to improve in the second half, provisions could be slightly lower.As late as April, UBS’s chief executive, Robert Studer, told the annual shareholders’ meeting he was confident the bank would present a good six- month result and a strong performance for the year.The forecasts were based on the belief economic growth would continue and the need for provisions would drop..

House builders issued a new plea yesterday for Government action to rescue the housing market. The day after Tarmac announced that it is selling its homes division, the National House-Building Council said housing starts were 14 per cent lower in the first seven months of this year than the same period last year. Separate figures from the Nationwide Building Society piled on the gloom. They showed that house prices edged up a fraction last month, but were lower than a year earlier. The Nationwide said it expected house prices to weaken further before the end of the year.
Tony Allen, chief executive of the NHBC, said the steep decline in housebuilding underlined “the urgent need for the Government to take urgent steps to stimulate home buyer confidence and boost optimism within the entire house- building industry”. Growing pressure for the Government to slow the downward spiral in the housing market has prompted the Treasury and the Prime Minister’s policy unit to start assessing possible Budget measures.City economist David Miles at Merrill Lynch said each new piece of bad news made the outlook worse.

“Expectations are among the keys to demand in the housing market. The market will be dead for the next two years, with no significant rise in prices until mid-1998,” he said.Prefiguring official figures for housing starts due out today, the NHBC reported 13,120 new starts in July. It brought the total for 1995 to date to 98,943, down from 115,201 in the first seven months of last year. An average of 649 new homes a day were sold last month – 5 per cent lower than the previous July.The Nationwide Building Society said yesterday that its index of house prices, adjusted for seasonal fluctuations, had recovered by 0.2 per cent in July after three successive monthly declines but was 1 per cent lower than a year earlier. Paul Sanderson of the Nationwide said: “Prices have weakened since the end of last year and will be flat at best until the end of this year.”Earlier this week, Halifax building society reported a 3 per cent decline in house prices in the year to July. It predicted that prices would remain flat for the rest of this year.Housing market gloom took the shares in house builder Redland to a new low yesterday They closed down 9p at 398p.. Mercury One-2-One, the operator owned by Cable & Wireless and US West, raised the stakes in the mobile telephone market last night with a pounds 235m expansion of its network.