Economy Watch: British Bank to Re-Spark MBS Market?

The RBS, formerly a big player in MBS, was KO'd when the worldwide financial markets went FUBAR two years ago, and hasn't securitized since.

September 15, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user ell brown

The Royal Bank of Scotland is planning a £4.7 billion ($7.2 billion) mortgage-backed securities offering, according to The New York Times on Tuesday, citing an anonymous “person with direct knowledge of the matter” after it was first reported by The Financial Times. The RBS, formerly a big player in MBS, was KO’d when the worldwide financial markets went FUBAR two years ago, and hasn’t securitized since.

In fact, Royal Bank of Scotland Group has been busy with other things since 2008, namely struggling to stay in existence. The British government, deeming the storied institution too big to fail, stepped in to the tune of £37 billion in late ’08 and bailed the bank out. Now the Crown owns about 83 percent of the bank, though its stated policy is to reprivatize it eventually.

Four or five years ago, a securitization of this size would have been about as noteworthy as the repaving of a city side street. But no MBS issuance this large has been proposed for many moons. If the RBS MBS deal comes to pass, it would probably be good for the British and world economies, which need more credit flow.

Retail Sales Looking Better Again

Retail sales scored a 0.4 percent increase in August compared with July, according to the U.S. Department of Commerce on Tuesday. Leading the way was clothing and sporting goods, which customarily drive retail sales toward the end of summer as families pick up back-to-school merchandise.

Naturally, other retail sectors didn’t see positive sales growth. Big items, such as cars and car parts, dropped 0.7 percent, while electronics were down 1.1 percent and furniture sales declined 0.5 percent.

The ICSC-Goldman Store Sales Index, which tracks weekly sales at major retail chains, likewise saw an uptick 0.8 percent in sales for the week ending September 11. The report postulated the cooler weather spurred demand for fall and back-to-school clothing.

Smart Phones Buoy Best Buy

Gizmo purveyor Best Buy has been a big retail winner lately, despite the downtick in electronics sales. According to the company on Tuesday, its 2Q10 earnings per share skyrocketed 61 percent, from 37 cents during the same period in 2009 to 60 cents, even though comparable store sales dropped 0.1 percent over the same period.

Among other things, the company did well selling smart phones and the extras that come with them. “We saw a rate improvement in Best Buy Mobile during the quarter as consumers continued to respond positively to our employee non-biased expertise and broad handset and carrier offerings, which translated into increased sales of smart phones and related higher margin attachment of accessory items,” noted Jim Muehlbauer, Best Buy CFO, during Tuesday’s conference call.

Wall Street turned in a mixed day on Tuesday, with the Dow Jones Industrial Average losing 17.64 points, or 0.17 percent, while the S&P 500 dropped a scant 0.07 percent. The Nasdaq ended up 0.18 percent.