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From: ldo79	2/2/2008 11:38:17 PM
	of 436258

London Scottish Bank mulls fire sale of invoice business By Mark Kleinman and Philip Aldrick Last Updated: 11:25pm GMT 02/02/2008 London Scottish Bank (LSB), the debt collection and finance group, is considering the disposal of its invoice finance business as part of a fire sale of assets to repair its capital base after breaching regulatory rules last year. The lender has appointed NM Rothschild to lead a strategic review of the business since revealing in December that it has undershot international banking guidelines on the amount of capital that must be set against assets. LSB is now looking at selling assets, including the factoring and leasing division, which provides small and medium businesses with their day-to-day working capital needs and invoice finance services. LSB, which is capitalised at £40m and has £388m of assets, revealed on New Year's Eve it will fall £13m short of the regulator's tier one capital requirements - a measure of financial strength. Asset sales, such as invoice finance, are now expected to help make up the shortfall. The bank has also revealed plans to scale back its lending volumes "until the shortfall in regulatory capital has been remedied". advertisement Hinting at potential asset disposals, it said last month it "is also examining a number of financing alternatives to increase its capital base". LSB reported back to the Financial Services Authority last month and expects to receive the regulator's assessment of the plan in the next few weeks. LSB's problems were caused by the January switch to new Basel II rules, which demand more capital be set aside for riskier assets. As London Scottish lends to those on lower incomes and has a relatively high impairment ratio, it is required to hold more capital than under the previous regime. Unexpected additional impairment provisions of £21.6m caused the bank to breach its regulatory requirements and pushed it into a loss of £4m-£5m. Full-year results and a further update on the bank's position, will be announced next month. LSB shares have tumbled two thirds to 27½p since the announcement. tinyurl.com

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