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Chid, the only thing you have been consistent with is being wrong. "Time alone will tell I guess." - Yes, it has done, consistently.

Comfy chair and the popcorn.... munch.... munch....

The two shorts (Systematic and Walleye) are still sitting on a 2.9m short, unchanged from last week.

Two days in a row the end of day auction has cleared significantly below the VWAP for the day and may well be a different interim strategy in play, although these games don't tend to be sustainable for long. Today for example the VWAP for the day was 555p with 45% of the volumes up 556-559 (3p range) and then the auction clears at a 7.5p (546p) discount with only 20% of the volumes, which will leave some sellers who pushed the price down hoping for the next day not opening and trading higher than today. Interim short day-day trading games, which may turn against them. Nearly 2x the auction volumes traded in that 556-559 range, which shows the degree of trading disparity.

Fitch were on the ball back in 2008 and well ahead of the curve of the market completely imploding whilst they seemed to have zero predictive forecast of those events within their forward looking ratings. Why did they not complete the downgrade several months ago ? Why do they think streamlining the business is negative ?

Back to the sun, popcorn again... munch... munch...

"The Committee understands ... should be brought within six years ... Smith v Royal Bank of Scotland [2023] (UKSC 34), 4 October 2023" - That supremem court ruling was on the 3 Oct 2023

Another court judgement was on the 15 Nov 2025 (Canada Square Operations Ltd (Appellant) v Potter (Respondent) also relating to the six year expiry. The quote from the case "Section 32(1)(b) postpones the commencement of the ordinary limitation period where any fact relevant to the claimant’s right of action has been “deliberately concealed” from them by the defendant"

The “deliberately concealed” may bring the Johnson type case possibly into that remit because of documentation errors relating to the disclosure on cluase 10 vs 12.6 and 13.3. Finance companies that paid attention to the documentation will not fall foul of any “deliberately concealed” possible issues and the FCA will have no recourse for any redress. This is where the question as to the £9.1bn imagination will have likely issues and credibility failings.

It will therefore be quite interesting if the FCA call upon this ruling and clarify what they determine as “deliberately concealed” compared to the supreme court court ruling. Outside of that scope, the FCA doe not have a legal remit to redress prior to the six years where there has been disclosure in accordance with the CONC rules at the time (e.g. Hopcraft and Wrench).

This is possibly pointing to the FCA ending up with massively distorted redress not a blanket across the whole industry.

Will be interesting to watch that committe meeting. My bet is still on for Nikhil being fired before the end of the year.

Special edition committe popcorn... munch... munch...

No change on the reporeted shorts, however someone appears to be very clearly buying based on the gap to the and of day auction, which also had 34% of the days volume. Prior to that 537p had an interesting 16% block of volume in that 1p band and puts into context the zero volume between 546 and 550.

Is it the smaller short volumes (sub 0.5%) closing out or new buying volumes being picked up early.

Weekend popcorn to all.... munch.... munch...

No change on the reported short positions, all but one short has reduced recently (only 2 reportaqble positions remain) and Walleye may well be just holding one side of a swap that has been hedged out because they have not changed position since 24 Jun (411p) and prior to that 31 Mar (278p).

Last two trades before the close showing a wider mark on the bid 532.5 and offer 534 with the auction clearing at 533p the same level as the seven trades after 16:26pm compared to the VWAP of the last half hour of 533p on 228k volume. Was it a "Sell" or a "Buy" - neither is was an auction of multiple parties buying and selling.

Rest of the days trading with lower volumes sub 525p (33%) and 36% above 530p given the 28p spread on the days trading. An interesting volume spread around 530p at about 2p each side where 25.6% of the volume was in 2 x 1p bands, possible odd coincidence.

Plain popcorn... munch... munch...

For shorts the reporting threashold is 0.5% minimum and then 0.1% change in position size.

Long positions have a reporting threashold of 5%, so a magnitude difference in who has to report.

The shorts only had an advantage whilst there was a very high degree of uncertainty, which precluded anyone even considering a bid (stochastic run over short risk). That uncertainty tilted the market from a balanced trading arena. Legally the position is quite clear, even with the FCA posturing that they are going to ignore the Supreme Court ruling by way of instigating redress against claims that the Supreme Court did not have an issue with.

The Barclays case I am expecting the ruling to either go to Barclays and/or end up at the Supreme Court in 2026. If it goes Barclays way then the FOS will have to decide, if it goes FOS then Barclays will highly likely take it to the Supreme Court (risk / return and the deffereal of payments). How the FCA could instigate a redress scheme in this timeframe would require that it is a voluntarily entered into arrangement, which based on being mislead on PPI last time I can't see happening without more legal cases.

In terms of valuations in the interim, that I'm thinking is going to be lead by short closing, other long term holders buying back in and possible bidders slowly aquiring volumes before becomming visible (avoiding or countering some of the CoCo bond part poison pill). Does the market really think it's a less certain but more bearish payout situation than early 2025 ? Remember, these are not forever payments at a time the bank has been around for over a hundred years. It really is a Buffet moment of the market transferring wealth from the impatient to the patient, nothing else.

Patient feet up popcorn time... munch... munch...

"You say that CBG on a valuation perspective is still lagging" - Yes, CBG was around 1500p in 2021.

After any payout do you think the ongoing business is more valuable than in 2021 or 60% less valuable ?

"They are also on a Price / Book of about 0.6 " - Where are you making this figure up from ? If you want to keep re-quoting figures, provide an accurate source link.

Equity to price ratio 0.46

Page 1 NAV per share £10.10 / TNAV £8.40

Page 12 and page 36. Equity £1.710.7m. - per share £11.37

Page 36 Retained earnings £1,510.6m. - per share £10.04

Page 65 Total regulatory capital £1,657.3m - per share £11.01

Fair value of popcorn... munch... munch...

Sources :

https://www.closebrothers.com/investor-relations/investor-information/results-reports-and-presentations

http://www.closebrothers.com/system/files/rrp/press/CBG%20HY25%20Results%20RNS%2018.03.25%20FINAL.pdf

And another one bites the dust (and the reason for yesterdays ramp) as Millennium buy back to 0.48% from 0.58%. So that ramp of 30p was assisted by 0.1% of a buyback leaving 1.95% of two shorts above 0.5% reporting threashold and two recent shorts buying back to below 0.5%. Obviously the shorts were right all along and had secret wispers from the court and Reeves.

Interesting drift today with cautious sellers not wanting to get run over by shorts and longs buying in with 510 being a stretch too far. End of the day looked quite interesting trading along with 515 support and the closing auction then clearing with 205k in volume 4p higher at 519.5p. That's £1m in volume at a 4p premium. That auction premium holding for the last two days, which is not surprising with shorts closing out and bodes well for a near term continuation of a possible slow and steady rise over the next month.

CBG on a valuation perspective still lagging way behind all the other banks.

As usual just my guesses, etc.

Summary popcorn... munch... munch...

Appreciated, popcorn in the post... I have only ever dealt with asset valuation that has been more physical long term based with high relative extrinsic (high ambiguity) value. Not really bank type, unless a large multi kt pile of material equates to a deposit account and churn takes on quite a different meaning. I'll stick to this side of the chinese wall...

Chopstick popcorn drop... munch... munch...

Barclays equity to price ratio 0.67

Market close 360.85p - shares in issue 14.180m

Page 5 - NAV per share 442p / TNAV per share 384p

Page 55 - Equity £76bn market cap £51bn

Source : https://home.barclays/content/dam/home-barclays/documents/investor-relations/ResultAnnouncements/H12025Results/H125-Barclays-plc-6-K.pdf

Still think CBG is trading close to anything resembling fair value ?

Banked for later popcorn.... munch... munch...

Equity to price ratio 0.46 - CBG is undervalued compared to the rest of the banks.

Page 1 NAV per share £10.10 / TNAV £8.40

Page 12 and page 36. Equity £1.710.7m. - per share £11.37

Page 36 Retained earnings £1,510.6m. - per share £10.04

Page 65 Total regulatory capital £1,657.3m - per share £11.01

Those all discount future earnings at a value of zero.

Would anyone sell a business for the asset value only (TNAV) and not attribute any value at all to future earnings and discount the equity ?

To me that says £8.40 is a minimum.

Fair value of popcorn... munch... munch...

Sources :

https://www.closebrothers.com/investor-relations/investor-information/results-reports-and-presentations

http://www.closebrothers.com/system/files/rrp/press/CBG%20HY25%20Results%20RNS%2018.03.25%20FINAL.pdf

The point of the last post was to possibly (very big uncertainty) question how FirstRand was operating considering they had two significant contract issues (clause 10 direction and 12.6 and 13.6 renumbering of the commission relevant point) and a seemingly issue of a loss on any finance agreements that are paid off early.

This is something I would find incredibly difficult to see CBG as a 100+ year old bank doing and may have been part of the indication that the FCA mentioned in the conference call : Nikhil : " I'm going to be quite careful not to start saying something that might lead to identification of any sort of institution specific practices, but this is a highly heterogeneous market and there are very different practices across the market."

Completed the popcorn... munch... munch...

The FOS are like the FCA - will leave it at that because I may dig myself into a problem. If the FOS settled by conceding to Barclays that would hand the FCA an issue because it would potentially put regulator vs regulator.

Could FirstRand have other problems ?

Consider the reference within [43]

"The Trade Centre Wales and FirstRand had at the material time a Rates and Terms Agreement in force between them, included in a letter dated 18 July 2017, under which the dealer had discretion as to the interest rate between 8% and 13%. Commission was payable in two elements. First, commission of 80% of the difference between the minimum discretionary interest rate and the rate actually charged. Secondly, a revenue share of advance commission at 25.8% of the total amount of credit. Since the interest rate chosen for Mr Johnson was the minimum 8%, the first commission element was nil. But the second element amounted to £1,650.95, and this was the commission actually paid by FirstRand to The Trade Centre Wales."

When the math is worked out for this clause in relation to the £4,803.69 HP (18.1% APR) and £1,595.31 Loan (15.1% APR) the 25.8% of the total amount of credit could be viewed as a 1 year equivalent interest rate larger than the HP charge. In that context it could be viewed as numerically unfair if the loan is paid off early because in that instance FirstRand could end up with a loss on the business if the loan is paid off early with a lower interest total.

The combined HP and Loan interest was £2,635.20 and the commission of £1,650.95 that leaves FirstRand with £984.25 to accumulate or recover as part of the repayment schedule and due to the commission is only recovered towards the end of the repayment schedule. [45] "Mr Johnson repaid all his borrowings from FirstRand 21 months early, receiving the usual rebate of interest charges for early settlement." - contract was for 60 months.

The commission did not seem to have any [45] type clawback for early repayment. That would seem to indicate that FirstRand actually made a loss on the loan agreement. How many other contracts ended up with losses like this, which will then experience more losses due to contract and commission size errors directed by the Supreme Court ?

Are my math and thoughts correct ?

Mathmatical connundrum of popcorn... munch... munch...

In relation to the pending Barclays vs FOS case in relation to DCS and the ruling that favoured the FOS. The one which relied on a disinterested duty, which was overturned by the Supreme Court.

Within the supreme court ruling make particular note of (in full)

"[31] FirstRand paid TT Sports commission of £408.98. Apart from the Commissions Clause, that commission was not disclosed. The amount was made up from a two-element formula in FirstRand’s then standard dealer terms. The first part, of £299.60, was derived in part from the difference between the minimum interest rate in the range referred to above, and the rate actually set by TT Sports. The second part, of £109.38, was described as a “revenue share of advance” and calculated as 1.25% of the total amount of credit. Commission based upon differences in interest rates set by the dealer were banned by the FCA from use in motor finance from 2021."

Given the £299.60 interest rate difference was within this contract, and not ruled unfair by the Supreme Court, that creates a slight problem for the FOS side of the argument because they had zero threashold for the determination of unfair. This may well be pointed to specifically by Barclays to highlight that certain DCA's that followed the rules at the time and were outside the defines of "unfair" within the CCA the FOS do not have a case. Wonder how it's going to turn out..... and how the FCA are going to enforce a redress of these DCA agreements - against the Supreme Court.

Discresionary popcorn... munch... munch...

Correction.

[26] "The 2015 Wrench Credit Agreement was accompanied by FirstRand’s then standard terms and conditions (“the 2015 Wrench Terms and Conditions”). These included, at clause 12.6" .... “The customer has had his/her attention drawn to the provisions of clause 10 overleaf.” .... "The 2015 Wrench Terms and Conditions are not “overleaf” but in a separate accompanying document not signed by Mr Wrench. Clause 10 has nothing to do with commission."

This indicates that the contract numbering was being adjusted 12.6 in Wrench and 10 in Johnson, however the numbering error on it's own was not enough because Wrench was ruled against. The numbering error added to the issue.

Corrected some popcorn.... munch... munch...

The FCA are basing their approach on [329] "The failure to disclose to Mr Johnson the existence of the commission was a breach of CONC 4.5.3R which provided at the relevant time" highlighting the wording "existence" is very important and the reason why.....

[336] "It should also be pointed out that particular attention was drawn to clause 10 of the terms and conditions but not to clause 13.6. A customer would not expect that a commission of this size would be payable and, as a result, a term of the importance of clause 13.6 is required to be displayed more prominently and the customer’s attention expressly drawn to it." i.e. a contract error

But they missed out [261] "Similarly, CONC 4.5.4R required the disclosure of the amount of the remuneration only if the customer requested."

Significantly Wrench was not ruled unfair because [30] "and the same Commissions Clause, save that it was numbered 13.6." i.e. no contract error

The FCA are going to be caught out...... and the market may be in the process of figuring out the smokescreen from the weekend.

Contractually clueless popcorn... munch... munch...

'Fair value' is in a market term as vauge as 'unfair' from a CCA perspective. Wooly and down to the perception of the individuals involved at a particular moment in time base on the direction of the wind.

'Fair value' lies somewhere between 800p and 1500p and may well be dependant upon how far into the future your forecast is based and how much of that future value is brought into the current market price and the off book extrinsic value of the business.

Very simplistically with a net asset value of over £1.8bn how could a 'fair value' from a takeover perspective imply a £1bn discount to a bid when your lawyers may well be saying the compensation exposure is £100m ? Is that £900m of free money or a smaller pile of free money even if you detach your bain and imply a £400m compensation hit and still have a £600m pile or 75% of your bid (hypothetical based on todays 525p) ? i.e. a bid would only cost you £200m detached brain scenario and a negative book position if less than £200m exposure ?

Yes, nearing, just in the same context as we are near the Moon.

Orbital popcorn... munch... munch....

Citadel closed out 0.1% (to 0.48%) on Monday, ouch. Systematica also reduced 0.05% (to 0.65%) and that still leaves just over 3% short volume outstanding as the shares hit 525p. Over 4m still to buy back in.... Closing auction 525p with 336k volume, not a great day for shorts to play and close out via the auction.

Todays volumes being quite interesting with 30.5% (400k) being lifted around 500-504p so it may be that those derivatives around the 500p mark have been cleared. Above that the 520p (519-525) range with 22% and then between a spread that had 27%. Interesting 508-512p range had very light volumes of 2% (24k) so no real 510p level derivative volumes.

The market may well be looking at the FCA in a more logical manner and the legal teams reviewing the SC ruling compared to the direction the FCA is dreaming, which is resulting in a perspective that CBG is still cheap. Maybe...

Popcorn moves in myterious ways.... munch... munch...

At the moment in my mind there will be legal challenges because the bounds under which the FCA are resting on to force a redress scheme is the comment in the ruling relating to 4.5.3R, however the context around why and how that was breached is also to do with the documentation error. There is no half-secret nonsense going on that the court of appeal imagined and made a massive error with.

The statement of the court that non disclosure in onitself does not prove an unfair relationship also goes to the heart of the matter and the lack of a clear perception of a boundary (Plevin style) that is fair and unfair. The courts have constantly tried to avoid giving very clear guidance because it just sets a limit and that limit then becomes the market margin as to what is acceptable rather than competition driving that rate down. The FCA could indirectly instigate a hard marding on all car financing above that what competition would create.

Legally the FCA still have to stay within the rules and the part that concerns me most is the comment from the FCA council on 'framing' of the consultation questions as if it was a pre-determined path and the questions are just going to be a side show where they are framed around the FCA's long standing (ignoring the SC ruling) goals. I'm half tempted to start flooding the FCA with FOI requests with questions that may find a few needles in the haystack that end up being rather problematic. Maybe the government will add Nikhil to the tally of fired regulatory heads once the media hype fades.

How the FCA can quote a market wide commission pool of £8.1bn and then apply the allowable commissions the supreme court clearly defined and then return an upper estimate of £18bn is mind blowing posturing. Also saying that the FCA overheads for the scheme are going to be in the multi £bn range is curious as to why the media have not raised the question as to how inefficient the FCA must be if their overheads are going to be 20% or more of the scheme as a whole ? FCA job creation scheme ? Maybe that's just the media avoiding any simple math because they are unsophisticated.

The FCA can't ignore the Barclays case and it heavily rested on parts of the court of appeal ruling that have been overturned. The judges in that case will consider very hard at how the court of appeal judges were told how wrong they were before they do any liberal posturing.

The other curiosity, which nobody has picked up on the significance of, is the subtle element where the FCA 'told' the supreme court to settle the compensation side, when that is purely a judicial matter of independence. Maybe the FCA highlighted a factual instance of direct interference and judicial interference.

Meanwhile the derivatives around 500p must be quite large and wondering if 480p will creep up if a larger buyer(s) are having to raise the bid to get volume as the sellers dissapear. Just my guesses and thoughts.

Sitting and holding on to the popcorn.... munch... munch...

Friday saw Citadel reduce 0.03% and Systematica increase by 0.01% on the shorts, so it looks quite clearly like one was bearish and the other not so bearish. Uncertainty within the 4.76m short positions that lost £4.4m today and will be interesting to see who closed out or added today.

Interesting open at 477p (smaller gap due to the FCA) with 105k and the first minute seeing 519 trade as limits were blown and offers lifted in the first 35 seconds of trading taking the volume up to 295k. The first million shares in the first seven minutes of trading relative to the 5.8m daily total. Shorts and cashing in pushing the price back down would appear to run out of sellers at 460p as retail glee of a quick return cashing in ran out of steam and the shorts not seemingly as confident to try and push down today.

Following that 480p may have appeared to then have buyers that sat and held around the 480p level, which by the US market open at 2:30pm possibly prompted the day trading shorts to start to close out as additional buyers picked up more before the 500p rounded figure proved a stretch for today.

The FCA's job protection mode redress scheme in full swing with the regulator taking on the responsibility of conference calls with traders so that they can figure out where the shares should be trading, how strange is that... With that percpective in mind I'm almost to a conclusion that the FCA is doing exactly the same pattern that the court of appeal did with Wood and Keech and misinterpreting (or purposefully ?) the ruling for their own aims. The 'wide' 'framing' of the consultation in a couple of months or more (Barclays case ruling....) That to me looks like a judicial review or the head of the FCA being fired.

Off to top up the popcorn reserve... munch... munch...