Higher risks at small banks

THE number of small banks is dwindling. Wimbledon and South West Finance went into administration last week. National Guardian suffered the same fate in February 1992.

Both collapses have left investors feeling sorely aggrieved and, in many cases, out of pocket.

Small banks frequently offer high rates of interest to investors. But these are financed by high loan rates to borrowers who are often unable to borrow from high-street lenders.

If you invest with a small bank, you have to remember that higher reward inevitably means higher risk. If too many borrowers default on the loans, the whole empire comes crashing down.

Hampshire Trust is a private bank that pays depositors higher investment rates and lends money at higher rates to borrowers. However, it is adamant that it has got its investment and lending policy right.

Hampshire offers a six- month notice account, which pays investors 5.81 per cent net on balances of pounds 500 and above.

According to Chase de Vere, the best buys from the high street include a six-month notice account from the Portman Building Society, which pays 4.5 per cent on deposits of pounds 500. If you have pounds 100,000 to invest, the Bristol & West six-month account pays 5.55 per cent - still less than Hampshire.

Stephen Hunter, Hampshire's company secretary, says: 'Part of the reason why our rates are so high is that we do not advertise. It is also keeping the overheads as tight as we can. The senior management are all here, and we only operate from one office in Fareham, Hampshire.'

Mr Hunter says the number of depositors 'runs over the thousands', and the vast majority are recommended by existing depositors. For borrowers, Hampshire's base rate for loans is 13.5 per cent. The loans are arranged through introducing brokers.

Mr Hunter says that Hampshire is not the place for standard residential mortgages - because of the high interest rate. The bank will, however, look at proposals 'that other banks might not'. Mr Hunter says the bank has the specialist expertise and necessary control to be able to lend in this area.

Hampshire's loan book is about pounds 10m. However, Mr Hunter admits that there have been bad debts. 'Any bank that says that it has not suffered them is not telling the truth,' he says. The company accounts for the year ended April 1993 show a deficit of pounds 404,000. The year before, it was pounds 987,000. Mr Hunter says that as for other banks they were difficult times. 'But now things are looking a lot more robust.'

Life and Style
life
Arts and Entertainment
Diana from the Great British Bake Off 2014
tvProducers confirm contestant left because of illness
News
Brad Pitt and Angelina Jolie reportedly married in secret on Saturday
peopleSpokesperson for couple confirms they tied the knot on Saturday after almost a decade together
Life and Style
Chen Mao recovers in BK Hospital, Seoul
health
PROMOTED VIDEO
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Client-Side web developer (JQuery, Javascript, UI, JMX, FIX)

Negotiable: Harrington Starr: Client-Side web developer (JQuery, Javascript, U...

Structured Finance

Highly Competitive Salary: Austen Lloyd: CITY - An excellent new instruction w...

SQL Server Developer

£500 per day: Harrington Starr: SQL Server Developer SQL, PHP, C#, Real Time,...

C#.NET Developer

£600 per day: Harrington Starr: C#.NET Developer C#, Win Forms, WPF, WCF, MVVM...

Day In a Page

Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone
Amazon is buying Twitch for £600m - but why do people want to watch others playing Xbox?

What is the appeal of Twitch?

Amazon is buying the video-game-themed online streaming site for £600m - but why do people want to watch others playing Xbox?
Tip-tapping typewriters, ripe pongs and slides in the office: Bosses are inventing surprising ways of making us work harder

How bosses are making us work harder

As it is revealed that one newspaper office pumps out the sound of typewriters to increase productivity, Gillian Orr explores the other devices designed to motivate staff