Member Info for knot

Added a few more by unloading some other shares and a stretch down the back of the sofa.

Bargain popcorn on discount...munch...munch...

If you look at the correlation between CBG and Barclays it has been quite close in the last month plus timeframe, so the current pattern is mainly index related rather than CBG specific. When you then add in Lloyds to the equation with their larger liability they decorrelated from CBG and Barclays around the 2nd March as Iran kicked off. That gives an interesting picture as to the FCA leak theory - there is none.

The FCA are not going to announce anything more than what they have already proposed and already admitted that they are going to reduce, so any leak perspective would not really justify it being back down near the same level before the Supreme Court ruling (397p). The current bearish outlook is fully on the Iran situation that started late Fri 28 Feb and the reason for the drop from 500p.

Ahead of the FCA circus act, certain hedges will be placed or reduced because the pricing move caused by the FCA will decorrelate the share price move from the rest of the market. Prior to the Supreme Court ruling the share price dropped for about a week as people did not want exposure, but we are already near pre supreme court levels so if you think it's sensible to be below 400p (Iran discount) then sit back and wait for a cheaper share price.

What the FCA are going to announce this time may have more of a bullish surprise if they want to try and avoid an extremerly quick kicking that the redress scheme is absolute nonsense.

Todays post market balancing clearing again at a premium to the last trades, so early shorts closing out end of the day, just running with the market, trend is your friend. More guesses from me.

Oh, look, found the popcorn....munch...munch...

If you look back at the pre supreme court ruling the risk unwind before the ruling seems quite comparable to the current decline. Todays move is interesting in that it stands out differently to the prior days with a decorrelation to the other banks, with CBG falling much further on relatively little volume. The various news angles from the £1.3bn shadown bank hole in a £2.5bn book, which looks very questionable to the ongoing oil issues add to the uncertainty discount on everything.

The Walleye positions from last year (e.g.10th March 2025) are still rolling off and Actus made the first unwind in recent days after having built the short up to 0.8%. That unwind was before the Trump / Putin call that pulled the whole market back and the rise in CBG. Was that the level that Actus was willing / realising it was beneficial to unwind given the FCA are not able to go full £9bn mode ?

The move down towards the close looks very much a falling wedge of positions that are plausibly being closed out after the market close in the after market balancing, so will see how much of a premium the post close acution settles at compared to the last trade.

My guess at the moment is that this is a combination of the risk unwind before the FCA make the circus formality of presenting the scheme. I have been thinking over different issues on the proposal and still can't see how the FCA can create a compromise large enough that removes the probability of a court challenge without cutting redress back significantly to the £1-2bn ballpark. Even then the fiduciary duty of the lenders would not allow a compromise that is still clearly legally problematic. The danger to the whole system is that a compromise of convenience allows the success of a small chipping away process at the legality of the system as a whole and does not bode well for the future if not challenged.

Interesting times, popcorn as usual....munch...munch....

Looking at the 40k volume today and the relative price move, wow, that elastic is stretching. Afternoon snap back to where the other banks in the index are trading, who knows. The Walleye shorts from last year might be on interest as well for later in the week, who knows....

Back to the popcorn....munch...munch...

Well, after Trump's call with Putin for some strange reason I can smell burning....

Bit short of popcorn....munch...munch...

Yawn.... have they set the appeal date yet ? Yawn....

Where's that popcorn gone....munch...munch...

"If we proceed with a scheme, we are likely to make several changes." is a strange way to start a statement that still goes on to imply breaches of the statute of limitations. Roll on the first court challenge. Yawn.

Oh, popcorn again...munch...munch...

Setting aside another £100m was my view on CBG going full political to delay a tax liability to the treasury as a response to the FCA being ideologically detached from the law. That would not result in another loss, unless you think that CBG have turned into something like Wickes and have started manufacturing kitchen sinks.

Should the share price drop on whatever news, that's the market, it goes up, it goes down. Wherever a rational level is that is where it ends up eventually. In the interim it's buying and selling opportunities. Is the current price a buy or a sell based on a 3 year view not a 7 day panic ?

Either sit back, relax and watch or get active would be my response to "with the share price likely to be marked down by what - 50p?"

Guessing again, oh, popcorn, oh popcorn, where art thou, oh, popcorn.... munch...munch...

Tin foil hat warning, use your imagination here, this is not real disclaimer.

Thinking about the whole scheme, I do wonder if the withdrawal of the Clydesdale appeal was a strategy based on the realisation that the redress scheme was not entirely unbiased in origin. Let's imaging that a party realised that a few individuals were on a personal crusade to push forward a liberally ideal scheme regardless. Clydesdale was a barrier to the political march forwards to a liberal utopia and the emperors clothes were presented in full by waving an appeal to Clydesdale aside. The FCA went marching forwards with the emperors new clothes into the daylight with Hopcraft, Johnson and Wrench in the audience watching the march with bewilderment. The FCA at that point are unable to turn around because it would make clear the findamental error of the emperors clothes before they proudly marched off waving the liberal utopian banner aloft.

I do wonder, imagine and oh, look, popcorn....munch...munch...

Liberty2, seems like a fair start, maybe earlier, but the issue in my mind is over Clydesdale, which was originally set to be at the Court of Appeal level with Barclays. Hopcraft plausibly overules the legitimacy of Clydesdale quite easily and the court may well set aside or disregard Clydesdale altogether, which would be a blow to the FCA. If this happens it would cast serious questions around the legitimacy of the FCA actually putting forward a scheme that rests partly upon a ruling which has already been clearly ruled against by the Supreme Court. There is a growing possibility that the JR stage actually throws the whole redress scheme out as incompatible with FSMA 404(1)(b) - legal alignment.

In my view, zero payments will be processed in any way whatoever until after a ruling that takes into account the Clysedale nonsense. Even then I would expect the FCA to loose the first stage and they can't force payments while they are appealing something that was ruled against them. When the regulator tried to force payments before an appeal in PPI the banks just refused en mass and the regulator had to back down. This is no different, if anything it's far more clear the FCA are on the back foot if they go full redress nonsense.

In terms of CBG putting aside another provision, even if it does not make any apparent sense, think of it along the lines of CBG effectively just saying to the treasury, we are setting aside another £100m so we don't have to pay any tax on it "yet". That may well be a delay in a buyback or dividends, but I believe it would be a far better process to go through in the longer term and provide a greater return. Dividends, if they are paid, are not going to move the dial on the share price so I don't believe they are a high probability. However, a share buyback will move the dial significantly as the shorts have a rather painful realisation that the prior correlations are going to break apart. The investor base has arguably already adapted to a lower dividend expectation.

The real curve ball is that the FCA later try to turn to individual Bluecrest style redress schemes, which would equally kick off a new round of legal challenges and plausibly a political intervention because at that point it would be a clear abuse of power. Cant get an industry wide scheme so we will try individual schemes as a work around - imagine the press and the court cases. House of Lords would have a field day. I don't think the government would do well out of that process in many regards.

What do I know ? They are just my guesses and more guesses and the usual anoying popcorn...munch...munch...

The Judicial Review and court route will not be as long because the FCA will be faced with a clear loss and taking the case all the way to a loss would leave the FCA in a very weak position going forwards. The reason why is quite a few of the little court wins they have added up over the years will be reset and ruled against clearly in court. Like with Bluecrest the FCA may try to pull a deal of sorts to avoid the worst, but that deal will be brutal for the FCA. The FCA also appear to have been told that they can't make any new rules so they have had their wings clipped already so I only see them backing off from the current position. The banks also have a clear fiduciary duty to shareholder not to fold to a deal that is clearly detrimental.

Consider the scenario where the initial judicial review goes in the lenders favour and Clydesdale is set aside for a leapfrog to the Supreme Court. Clydesdale is what the FCA are pinning some support for the consumer duty on, so they will be fearful of that being ruled nonsensical imaginative creation of a fourth party into a deal that does not exist for example. Where the FCA have used a ruling that was clearly problematic to justify other actions, those actions may well face significant problems. Retrospective law protection does not allow clear misinterpretation.

The current pullback seems mainly index tracked (look at the performance relative to the banking sector) with a few larger positions pushing the indexed offset one way or another. The current tracking is already dislocated from the economic reality because of the FCA hangover, which will not last for much longer and then CBG will decorrelate from the bhaking index for a while. That may be a combination of a stochastic jump event and a slower decorrelation back closer to general bank book value levels.

Near term fear, is just that, fear. If the shorts can flush holders out, that is up to them, but they end up creating a discount in the process.

Who knows what the future holds, I don't know, I just have a tea pot and some tea leaves.

Oh, and popcorn...munch...munch....

Blinking - not really, just playing politics, head in the sand, "oh, I was just following what the court ruling." scape goat. Entirely government zero accountability type behaviour.

Meanwhile the FLA appear to be getting ready for the court case

https://www.globallegalpost.com/news/uk-finance-leasing-association-hires-ex-kpmg-uk-legal-head-as-first-gc-1823654454

Wooooo popcorn...munch...munch....

Separate to the AI summary. That would be the reprieve where the car dealer is the finance provider with zero separation between the vehicle price and the finance agreement, which makes the FCA redress approach on a commercial tie completely nonsensical. More so where those agreements wer at zero percent finance, which was always an absurd position for the FCA to take in terms of "unfair finance" at zero percent.

The "climb down" is nothing of the sort, rather a minimal recognition that the approach had absolutely zero legal basis to succeed.

The court route is still a complete certainty in my mind because the FCA have otherwise shown they are not recognising any change in the stance of Clydesdale with regard to the implications from the Hopcraft ruling. This is still going to be another instance of the government wasting legal costs and court time in the persuit of a failed socialist agenda. How many more millions are the FCA cgoing to waste and cost the taxpayers before anyone in the government steps in to stop the circus ? The FCA have already cost the Treasury well over £1bn in lost tax, which is a stunning self inflicted damage to tax payers. What do I know.

Now where was that popcorn... munch...munch....

1yr performance of CBG 54.75%, Barclays 53.76%. Recent Nov 25 through performance has mainly tracked the banking sector with the exception of the short closing end of Dec with the aftermath of FIL adding around 5% and different new shorts thinking this time it's different (not).

Volume today, seemingly relatively low with 49k before the close, so curious where the active day trading shorts are, unless the 485 level proved a bit painful and a lot stronger support. Ticked up at the close on not a lot of volume and equally not a lot of resistance. Comedy moment would say the day traders are off with the kids on half term, so drifting. 500 Seems to have some long dated (6 mth) resistance so guessing some option or swap volumes there. The comment "doesn’t mean its underlying investments are being liquidated" is interesting as this could be a short position on one or more lenders or not. If they are out of the money options, early liquidation could force a larger loss.

Who knows. Back to the popcorn...munch...munch...

Maybe not so far off topic because with all of the uncertainty the yields on debt are an issue and the treasury will be looking for more tax rises again. With the election risk there may be an increasing appeal to pushing the FCA to cancel the whole redress circus, which would give the treasury a very quick £1bn plus win due to the provisions and likely dividends that would flow out of the process. Compared to the slower damaging windfalll route that does not guarantee a high flow of the money back into the market and the tax net. The election element is then part of that whole picture of risk on all sides for all purposes.

In a way, if the government is given the prospect of the FCA costing more in the interim with court cases all year and additional tax losses to the Treasury as every company beefs up the provisions purely to withold the tax stream, that becomes quite painful for the government when they will be scrambling around for £10bn of so in tax raises, where a significant element is increasingly a self inflicted loss to the economy as a whole via the FCA.

Angie in No 10 would be pure comedy gold because that would guarantee the FCA tied up in court all year with idealistic ambition being run over by the law and common sense. The FCA may view Angie as a second wind and the prospect of a floating life ring nearby.

I do think the whole process redress is more in the political realm than anything to do with actual harm or following the letter of the law (unless it is the imagination of a Clydesdale 4th party).

Who knows.... comfy chair, popcorn stocked... munch... munch...

Some of these provisions I would have a slight guess is that they are being used as a political messaging option. If you don't need to make a provision because you have a fair idea that the FCA are going to face some U-turns then provisioning purely to decrease the tax revenue to the government becomes a fair option. If the government refuses to behave fair then why should companies equally not play the same game. With this outlook I would expect more companies to increase their provisions purely to play the game against the treasury and the government, although I do wonder if the premium finance climb down by the FCA is the indication the FCA have been prevented from any further action.

That is all on top of the current circus around an Island (amazingly a choice of more than one option there) that may cause the government to opt for snap elections to try and catch Reform off foot due to a lack of local candidates, increasing the coalition probability much higher.

Need to stock up on some more popcorn....munch...munch...

Quite an interesting situation the FCA have put forwards in relation to the relative interest rates on motor finance that are deemed unfair, where the rates the FCA have just stated are market competitive and acceptable in premium finance are 2x or higher than what motor finance ends up with and a circus act of a redress proposal.

The one thing that I still struggle to see how the FCA have any financial competence is when they have (unintended consequence) dragged zero interest rate deals into the circus act of redress (commercial tie). This is a real connundrum for the FCA because they have to admit that the cost of finance is actually bundled with the price of the car and is then impossible to argue that the consumer did not know the price of the car. The issue it creates is the conflicting position where the car price has a discount that is in the cost of finance, where the FCA can't argue one is fine and the other is not. This is on the basis that in both instances the overall costs involved (what is paid) is fully clear to the consumer before they sign. This is the critical argument that will be made in court as it is the total agreement that the consumer accepts. The argument the FCA put forward is then on who is getting what slice of the cake as if it is a playground argument about who had the better trainers. This is like the trap Clydesdale fell into by imagining a new party to the commission who is made up outside of the triparty agreement (indicating four parties), where the argument is over slicing of the cake (when two of those parties are the same person as per Hopcraft - so effectively only two parties in the deal). The premium finance situation the FCA have just backed off from, which is the argument over the size of the cake, is then problematic with the current redress proposal of arguing that compensation of a sub 1% difference is fair at 5% when admiting that 20% on premium finance is the market and fair.

I'm quite looking forward to the FCA ending up being deeply embarrased in court and potentially having the whole redress scheme thrown out.

Quite interesting that two of the shorts cut thier positions back the day before the FCA final report was seemingly published, unless it was openly briefed last week ?

Zero interest popcorn....munch...munch...

So, the mud cleared (Bloomberg reported) that the new T2 issuance is for £250m and was over subscribed by around £1.7bn, so quite a bit of confidence in the subordinate debt. The yield was bid down with the competition as well, so looks quite good.

Ducks n popcorn.... munch...munch...

"Knot will be on a cruise" - More likey out feeding the ducks at the park, foxes need something to eat when it's cold. lol. nature.

Tier 2 is generally not allowed to be bought back before 5 years. The £200m issuance was June 2021 (15 Jun 2021 Investor presentation slide 31 foot note "Excludes the 2% £200m Tier 2 notes and concurrent cash tender for the 4.25% £175m Tier 2 notes" - CBG RNS dated 9 Jun 2021 results of tender offer), so the timing is before the 5 years and may have required regulatory approval. The timing is plausibly quite interesting because the £200m of T2 capital may have proven problematic for a share buyback and then consider it in relation to the plausible March timing on the pending FCA circus act. The notes were also due to be reindexed in September from the 2% although I could not find the details on the issuance that would include the detail on the reindexation relative to the current indicative yield of around 5.6% (other bond website). The £200m issuance appears to be the only tranche of subordinate T2 capital on the books with Fitch rating them BB+ in the last review against BBB for other debt (hence they were trading in the 98.9 ballpark). There is a fair bit of unknown at the moment because CBG may well buy back in £200m and issue a fraction of that in new notes that may be T1 or T2, increasing overall capital further while opening the way for an option of a share buyback. As per the RNS 26 Jan start, 2 Feb expire, 4 Feb settlement. Well before the FCA clowns roll up, roll up. Maybe just coincidental timing given the prior £175m (25 Jan 2017 issue - maturity 24 Jan 2027) was bought back in earlier as well (Jun 2021 - 6mth before reset date) and the holdout balance of £23m was bought 24 Jan 2022 on the reset date (5 years).

All will become clear when the mud is removed.

Who knows ? Popcorn maybe at the ready.... munch...munch...

Great article showing how badly the whole process is understood and how very few in government know how any sort of economics works.

Economic illiteracy, legal ignorance, liberal perceptions of entitlement and disowning of basic responsibility of decisions.

The article must have been written with a joker adding the zero percent interest rate as the first image. Unfair finance at zero percent, economic illiteracy proven in one image.

Need to restock on the popcorn for the amusements ahead... munch...munch...