Value of estate agents hit by Northern Rock fiasco

01 November 2007
Estate agents are starting to feel the effects of the Northern Rock situation, with the Humberts Group becoming the first to blame the struggling mortgage provider and bank for loss of sales and profits.

Humberts – a national estate agent and valuers – was one of the worst small-cap providers on the stock market this week, falling 17.89 per cent to just 39p, and citing losses in September caused by the Northern Rock crisis as the reason. Humberts had been expecting revenues of £1.8 million in September from the sale of residential property, but it accrued just £1.3 million.

The company said yesterday that it expects profits for this year to be below market expectations, despite the fact that the group had been on course for a strong year, because of the uncertainty in the wake of the Northern Rock outbreak which caused sales of residential property to drop considerably.

Max Ziff, CEO of Humberts, said: “We made good progress in the first half of our year and, until a week or so into September, we were on course for a strong year. However, on the news of the collapse at Northern Rock, consumer confidence fell and the ensuing uncertainty hit sales of residential property.

“Around £500,000 of revenue which would have gone straight to the bottom line, simply didn’t take place. Northern Rock is something that we simply could not protect ourselves against. There has been a clear improvement in October, although it is too early to say whether this is the start of a more positive trend.”

The company had also intended to branch out into the fields of agricultural and professional services business, but these plans have had to be shelved in light of the recent dip in profits.

Talks will be held tomorrow between the British Bankers Association (BBA) and some of the UK’s biggest banks in order to determine the reasons for the Northern Rock crisis, and whether more could have been done to prevent it and avert disaster.

It is hoped that a full blown inquiry into the first run on a British bank in 140 years might unveil some of the underlying weaknesses in terms of response and intervention. The Bank of England has received some criticism for its lack of haste in coming to Northern Rock’s aid, and it has been said that the Financial Services Authority (FSA) could have done more to spot the dangers of a liquidity risk and take actions to stop it.

Various bids have been made to rescue the flailing bank – from Virgin Money, JC Flowers and GMAC with Cerebus – but thus far, it is believed that none have come forward with enough effective tactics to deal with its problems – funding, rebuilding a viable future business, and repaying its contingency loan from the Bank of England which last week passed the £20 million mark.

Northern Rock shares fell a further 6.6p yesterday to 183.4p amidst concern that a takeover could still be some months off as the bank awaits more creative solutions to its troubles.

© Fair Investment Company Ltd

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