IT has been a tortuous few weeks for the Capital's once booming financial services industry.
The city's two biggest private sector employers – the twin banking giants RBS and HBoS – have been battered by the storms on the world's money markets.
The Royal Bank of Scotland has been brought to its knees as its share price plunged to the lowe
st level since 1993 and HBoS is about to lose its independence.
The big question now on many people's minds is "Who is next?"
With some money market-watchers warning that the coming months will bring a wave of bankruptcies in the insurance sector, thoughts in the Capital naturally turn to Standard Life, Edinburgh's third-biggest private employer. The fear is that – in the same way as American International Group (AIG) suffered shortly after the main banks in the US – it is only a matter of time before a UK insurer will become vulnerable.
The insurance giant's close links with HBoS – it is a major shareholder – have added to speculation about its future. And the fact Standard Life's share price tumbled yesterday, closing down 5.8 per cent at 241.5p, has done nothing to steady nerves.
But, despite the panic in the market, any careful study shows the company remains relatively well-placed to weather the storm. While nothing is certain, analysts agree that the insurance giant is unlikely to encounter the kind of difficulties experienced by some of its Edinburgh neighbours.
While concerns will naturally remain , it should not find itself having to put up the for sale sign on its business. Bryan Johnston, director with private client investment manager Bell Lawrie in Edinburgh, said the outlook was relatively bright for Standard Life.
"There is a general assumption that in a period of recession there may be less funds to spend in things like pensions, for example, and that is a general concern for the insurance industry," he said.
"The trouble is they suffer twice – less funds as well as a contraction of the value of their portfolio and asset management. But there is not anything unique or specific in Standard Life to cause undue concern."
Among the indications of the company's health is its capitalisation position: at the end of March it had £3.5 billion of "directive surplus" – or cash in the bank. The funds give it some flexibility to cover unforeseen circumstances.
Having traditionally targeted professional customers, it is thought to have more limited exposure to risks in the mortgage markets – something which played a big part in the troubles of the now-nationalised Northern Rock and Bradford & Bingley, as well as those at HBoS and RBS.
Although Standard Life Bank has £10.6bn of mortgages under management through its online and telephone service, its mortgage arrears rate – showing the ratio of customers that have missed mortgage payments for three consecutive months – was only 0.24 per cent at the end of March. While the figure had increased by a third since the start of the year – which analysts say is a sign that consumer behaviour changes are impacting the company's business – it is still less than a fifth of the industry average. It has always aimed its mortgages at the professional sector and took part in fewer high-risk mortgages.
The main risk facing Standard Life is that its life and pensions arm – the biggest part of the company – suffers a plunge in new business. That had not happened when it last published results in March, but remains a worry in these turbulent times.
One insurance industry insider said: "In the first half of the year there has been very little new money coming into the sector – people have less disposable income to buy an investment bond or to top up an ISA – but the money already in the market is moving around. There is a school of thought that at times like this more than ever you have got to save for the future. People will still need to save, but consumer behaviour is beginning to change, and some will be deciding how much they can put in savings."
The other area where it does remain vulnerable is the risk of a dramatic downturn in the value of its shares. Standard Life Investments is a major investor in HBoS and owns 3.14 per cent of all shares in the firm, meaning it will have seen the value of its holding plummet in the last year.
In March 2007, Standard Life – which employs 6000 staff in Edinburgh – announced that it wanted to cut 1000 jobs before the end of 2009, although it has insisted that it will use compulsory redundancies as little as possible. But there can be no guarantee that external economic pressures will not cause it to increase that figure.
• Standard Life has completed the acquisition of employee benefits software firm Vebnet after the £24.2 million deal was backed by 93 per cent of shareholders.
Customers are warned over dormant accountsBANK and building society customers are being urged to check old or forgotten accounts before the Government gets its hands on their cash.
Legislation soon to be passed at Westminster will see money which has lain untouched for more than 15 years taken into a central fund and used for worthwhile causes.
Edinburgh customers alone have hundreds of thousands of pounds sitting in such accounts.
Figures from HBoS show it has 568 dormant accounts containing nearly £300,000.
And HSBC said it had 1315 dormant accounts in their East of Scotland region with a total of £1.3 million in them.
Banks and building societies are expected to try to reunite customers with their money before the scheme is launched in the second half of next year.
And customers will always be able to come forward and claim their cash.
Tony Wilcox, head of savings at Halifax said: "Some customers may not even realise their accounts are classed as dormant, they may even have left the money there untouched as a nest egg. Any account that has not had any activity on it in the last 15 years is considered dormant and the addition of interest does not count as activity."
A Consumer Focus Scotland spokesman said: "Let's not forget who this money belongs to. It does not belong to the banks.
"Banks and building society accounts could be 'dormant' for lots of reasons.
"They could have been opened when someone was a child and may now be forgotten; the account holder might have moved, or they may have died which means that their assets would normally belong to their next of kin.
"There is no time limit here. So long as you can prove that an account is yours, you are entitled to get your money back, however much time has elapsed."
• Customers can trace dormant bank accounts at the British Bankers' Association website: www.mylostaccount.org.uk
• Markets plummet again as worldwide recession loomsAN EVOLUTION1821: Company formed as Insurance Company of Scotland formed in Edinburgh
1825: Changed name to Standard Life
1837: Buys 3 George Street
1839: Creates headquarters at 3 George Street
1920: Starts pensions business
1925: Mutualisation
1960: Becomes largest mutual in the UK
1997: Standard Life Bank formed
1998: Standard Life Investments launched
2005: Announces it is to demutualise
2006: Floats on the Stock Exchange
Capital rents start to soar as potential buyers sit out credit crisisRENTS are soaring in the city as increasing numbers of people decide to put off buying a home.
A one-bedroom flat in Gorgie has recently been rented for £600 a month, a new high according to Braemore Property Management. It says properties are now snapped up faster than ever.
The average rent for a one-bedroom flat in Edinburgh is around £527, according to Citylets recent rental report. Two-bedroom flats cost an average of £676 per month, with the New Town and Stockbridge the most expensive areas.
Colette Murphy, director of Braemore, said the Gorgie flat was let to a professional couple after just two viewings.
She said: "The marketplace has become highly competitive, with rental levels rising in many areas. In some cases, we have seen properties being let for more than they ever have done in the past – particularly one-bedroom properties.
"This flat in Gorgie is a good example of how much tenants are willing to pay. In the past, the most we would have expected a one-bed apartment in that area to be rented for would have been around £550."
She said the rise in demand for flats had also affected traditionally competitive areas such as The Shore in Leith, where the firm recently let out a two-bedroom flat, which was previously let for £650, for £750 .
David Marshall, a business analyst with the Edinburgh Solicitors' Property Centre, said: "There's some evidence that there is increasing demand for rental properties. Many people are unable to secure a mortgage, or in some cases people are choosing to sit out the market to see what happens with house prices.
"People are looking to rent as a short or medium-term option. I suspect this won't be a trend in the long term."
The full article contains 1545 words and appears in Edinburgh Evening News newspaper.
