The Telegraph reports that holders in PIBS will see them converted to PPDS or Profit Participating Deferred Shares.
It is anticipated that the new shares will pay an annualised income of 3%.
Saturday, 20 June 2009
Saturday, 14 February 2009
PIBS safe so far......
Anybody considering investing in a PIBS or PSB first acts how safe is my investment. Will I continue to receive my coupon / interest payments and should the bond be redeemed will I receive my capital back.
Well so far no bank or building society has failed to pay their coupon and no PIBS have been defaulted on. But we are living in extraordinary times and with the government owning several of the minor former building societies then the future is uncertain. The conflicting consideration for income investors are:
1. This government have shown them to be less than consistent or principled when dealing with financial markets and are quite prepared or able to act incoherently often without realising. This makes the chances of default a real concern.
2. The sums involved are microscopic compared to the scale of government investment in the banking sector. Is it worth the government confronting controversy of defaulting on a loan for say £20million in the case of Northern Rock PIBS. Logic would say no but as it has been said before.
We are living through extraordinary times.
Well so far no bank or building society has failed to pay their coupon and no PIBS have been defaulted on. But we are living in extraordinary times and with the government owning several of the minor former building societies then the future is uncertain. The conflicting consideration for income investors are:
1. This government have shown them to be less than consistent or principled when dealing with financial markets and are quite prepared or able to act incoherently often without realising. This makes the chances of default a real concern.
2. The sums involved are microscopic compared to the scale of government investment in the banking sector. Is it worth the government confronting controversy of defaulting on a loan for say £20million in the case of Northern Rock PIBS. Logic would say no but as it has been said before.
We are living through extraordinary times.
PIBS in nationalised or part nationalised banks
One of my questions since discouvering PIBS is what is going on with the PIBS or Perpectual Subordinated Bonds PSB as the pibs are banks and former building societies are technically known as.
I recently came across the website of the UK Shareholders Association which explains very clearly what is happening in respect of the PSBs relating to the different banking organisations affected by the current crisis.
1. HBOS & LLOYDS bondholders are currently safe and will be part of Lloyds financing
2. NORTHERN ROCK has been nationalised and refinanced. It is reducing its mortgage book prior to a probable eventual sale. PIBS are continue to receive interest. If the Government fail to find a buyer the bank would be wound up and importantly PIBS holders would receive payment before the Governments loan is repaid.
3. BRADFORD & BINGLEY continues to pay the interest on their former PIBS. However subordinated debt such as the PIBS ranks behind the governments debt.There is therefore a possibility of there being no capital left in the bank following the Government’s and FSCS’s charges for the interest and capital repayments which would arise over many years of funding B&B. This would mean that bondholders would be wiped out as would the shareholders of B&B. Only if there is any capital available to repay bondholders would the subordinated bondholders be repaid their capital at the par, face value, of the bonds.Under the terms of the current Treasury order there may be little hope of the money being made available to make interest payments long term and this is reflected in the current price of the bonds.
I'm therefore going to give Bradford and Bingley a wide birth even if the current yield at over 40% looks very tempting.
Friday, 13 February 2009
Best source of pibs info
I've just found a great new source for PIBS information. The site is called fixed income investor and it gives up to date data on PIBS prices, graphs and yield analysis. There is also some editorial comment on some of the PIBS. This recent article on the Nationwide 7.25% PIBS is very complementary but this PIBS only yields 7.5%. Personally, I'm looking for nearer double digits. Thats why I plumped for my first holding in the West Bromich BS 6.15% at 60p it just about does a double digit yield.
I'm just hoping that the managers having being investing in too many toxic assets over their in the Black Country such as loaning money to the struggling local footy team West Bromich Albion.
I'm just hoping that the managers having being investing in too many toxic assets over their in the Black Country such as loaning money to the struggling local footy team West Bromich Albion.
Sunday, 8 February 2009
Where to get up to date PIBS prices?
Where can I get up to date PIBS prices?
There are several sources I find useful. Online you can go to a PIBS price chart in thisismoney the online part of the Daily Mail. Alternatively you can go to Collins Stewarts website and download their up to date table on PIBS PRICES
For those more traditional income seeking investors who like to stay non digital try the FT WEEKENDS Money sections DATABANK. PIBS prices here are updated weekly.
All these prices are only updated weekly so for a real time update you will have to phone your broker.
There are several sources I find useful. Online you can go to a PIBS price chart in thisismoney the online part of the Daily Mail. Alternatively you can go to Collins Stewarts website and download their up to date table on PIBS PRICES
For those more traditional income seeking investors who like to stay non digital try the FT WEEKENDS Money sections DATABANK. PIBS prices here are updated weekly.
All these prices are only updated weekly so for a real time update you will have to phone your broker.
PIBS - first purchase
I finally took the plunge last week. I bought 2500 PIBS in Britannia 5.5555% PIBS (call 14/12/2015)at 60p which should give me a gross yield of around 9%. Not bad I thought. A bit of drama arose when I received a call from my stockbroker TDWATERHOUSE a few minutes after my purchase informing me that purchases could only be made in 1000 unit lots. I plumped for 3000 given that a 9% yield was just tooo juicy to resist.
Why Britannia? Well having just agreed a merger with the COOP I figure they were a pretty safe bet not to go bust.
I will be looking at topping up my holding in PIBS over the coming weeks and will keep you updated with my next purchase.
Monday, 12 January 2009
PIBS income generating opportunity
Savers and income seeking investors should take a look at this income generating option.
For anybody that was stunned by the recent scare over the financial health of some of most respected banks and financial institutions we are suddenly aware that even what were seen as risk free deposit accounts with banks and building societies are not completely risk free. If those financial institutions go bust then their is a risk that you as a saver may lose all or some of your savings. Thankfully, the Government recently increased the amount of a savers savings that are guaranteed to £50,000.
Are you prepared to risk a PIBS?
Therefore savers and investors who are prepared for a bit of risk may want to consider what are called PIBS or Permanent Interest Bearing Securities. n the very unlikely event of a building society getting into financial trouble, it can miss paying interest on PIBS. If the society became insolvent the PIBS holders would be last in the queue to get their money back. All the other investors would be paid first, and only if there was sufficient left would the PIBS holders be repaid. Also, unlike other building society investors, PIBS holders are not covered by the Financial Services Compensation Scheme. So far no building society has failed to pay interest when it falls due. However, the recent debacle with former building societies which have been taken over by the government have illustrated the potential risks that holders of PIBS face. In the case of Northern Rock PIBS the government has continued to pay the coupon or interest whilst for Bradford & Bingley the situation is less clear. Check out this article on these PIBS for some up to date info.
So clearly there are some risks attached to buy PIBS but what about the returns?
Currently the best rates available on fixed rate PIBS are a stratospheric 30% but this is on the Bradford and Bingley PIBS where there is considerable debate over whether the coupon will be met this January. Interest or the Coupon as it is known is paid twice a year.
More typically PIBS yield between 7-10%. Given that interest rates for many savers are nearer 1% than 10% this is looking very attractive, especially for what up until recently were considered very low risk investments. I'm going to be looking at several PIBS for inclusion in my own income generating portfolio and will go through the selection process in future posts. At the moment the best place to get an overview on yields is the FT weekends Money supplement or go to Collins Stewart website. Remember PIBS which are traded on the LSE prices will vary daily in the same way as shares.
How do I buy PIBS?
are traded on the London Stock Exchange (LSE) in much the same way as equities.
Market makers will quote a firm two-way price on the LSE dealing screens, though there is a limit to the size in which they are obliged to deal at these prices.
The spread between the bid (the price at which you can sell) and offer (the price at which you can buy) and the quantity at which the quoted prices are firm will vary from stock to stock.
The stockbroker executing the business for you will be able to give you the specific details for the Pib you are looking to deal in.
No stamp duty is paid on purchases of Pibs
Other info about PIBS
Former building societies including Halifax and Cheltenham & Gloucester can also issue Pibs and currently do so, although these are referred to as PSBs (Perpetual Sub Bonds).
You do pay income tax on Pibs, but you can shelter them in a tax-free Isa. Many of the Pibs have very long redemption dates while some don't have any redemption-dates. If you invested in Pibs this would make you a member of the society. They act much like bonds, so are not risk-free. So, if interest rates are rising their price will fall.
Need to know more about PIBS or have a comment about investing in PIBS post a comment below
For anybody that was stunned by the recent scare over the financial health of some of most respected banks and financial institutions we are suddenly aware that even what were seen as risk free deposit accounts with banks and building societies are not completely risk free. If those financial institutions go bust then their is a risk that you as a saver may lose all or some of your savings. Thankfully, the Government recently increased the amount of a savers savings that are guaranteed to £50,000.
Are you prepared to risk a PIBS?
Therefore savers and investors who are prepared for a bit of risk may want to consider what are called PIBS or Permanent Interest Bearing Securities. n the very unlikely event of a building society getting into financial trouble, it can miss paying interest on PIBS. If the society became insolvent the PIBS holders would be last in the queue to get their money back. All the other investors would be paid first, and only if there was sufficient left would the PIBS holders be repaid. Also, unlike other building society investors, PIBS holders are not covered by the Financial Services Compensation Scheme. So far no building society has failed to pay interest when it falls due. However, the recent debacle with former building societies which have been taken over by the government have illustrated the potential risks that holders of PIBS face. In the case of Northern Rock PIBS the government has continued to pay the coupon or interest whilst for Bradford & Bingley the situation is less clear. Check out this article on these PIBS for some up to date info.
So clearly there are some risks attached to buy PIBS but what about the returns?
Currently the best rates available on fixed rate PIBS are a stratospheric 30% but this is on the Bradford and Bingley PIBS where there is considerable debate over whether the coupon will be met this January. Interest or the Coupon as it is known is paid twice a year.
More typically PIBS yield between 7-10%. Given that interest rates for many savers are nearer 1% than 10% this is looking very attractive, especially for what up until recently were considered very low risk investments. I'm going to be looking at several PIBS for inclusion in my own income generating portfolio and will go through the selection process in future posts. At the moment the best place to get an overview on yields is the FT weekends Money supplement or go to Collins Stewart website. Remember PIBS which are traded on the LSE prices will vary daily in the same way as shares.
How do I buy PIBS?
are traded on the London Stock Exchange (LSE) in much the same way as equities.
Market makers will quote a firm two-way price on the LSE dealing screens, though there is a limit to the size in which they are obliged to deal at these prices.
The spread between the bid (the price at which you can sell) and offer (the price at which you can buy) and the quantity at which the quoted prices are firm will vary from stock to stock.
The stockbroker executing the business for you will be able to give you the specific details for the Pib you are looking to deal in.
No stamp duty is paid on purchases of Pibs
Other info about PIBS
Former building societies including Halifax and Cheltenham & Gloucester can also issue Pibs and currently do so, although these are referred to as PSBs (Perpetual Sub Bonds).
You do pay income tax on Pibs, but you can shelter them in a tax-free Isa. Many of the Pibs have very long redemption dates while some don't have any redemption-dates. If you invested in Pibs this would make you a member of the society. They act much like bonds, so are not risk-free. So, if interest rates are rising their price will fall.
Need to know more about PIBS or have a comment about investing in PIBS post a comment below
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