July 31, 2008 – 10:42 pm

Across the Atlantic, they’re playing the “Beat Estimates” game in Europe, too. It’s not very original, but if your company is a bank that deluged itself with high-fee junk loans during the credit bubble, it’s really the only game in town. So, here comes HBOS with their version, which is remarkably similar to everyone else’s. Did we say it’s not too original? Witness for yourself:

HBOS, Britain’s biggest mortgage lender, gained in London trading after first-half profit fell a less-than-estimated 56 percent following 1.1 billion pounds ($2.2 billion) of writedowns for debt investments.

“There was an absence of any horrible surprise,” said Dave Bradburya London-based fund manager at Canada Life Ltd., which oversees $6 billion including HBOS stock.

Presumably, Dave Bradbury would reward his kid for getting a D in Algebra when he had been expecting an F. We are not here to tell anyone how to raise their kids, but is this what we’ve come to? Investors reward anyone for anything, just so long as they were prepared for something worse.

Oh yeah, we get it now. It’s not that profit fell FIFTY SIX PERCENT, but rather that it only fell a “less-than-estimated 56 percent.”

Aside from that, the bank got its rear handed to it when a lot-more-than-expected 92 percent disdained the banks rights issue last week.

HBOS PLC said Monday that only about 8 percent of its shareholders opted to buy into its 4 billion-pound ($8 billion) rights issue.

Even though the bank got its $8B, the underwriters had to come up with the other 92 percent for the junk they had expected to dump on the public. Talk about beating estimates! Well, you can be sure Morgan Stanley and Dresdner won’t be so ready to get burned again. At least one avenue of capital -during the credit crisis- has been effectively blocked. The bank responded by raising loan loss reserves to $2.58B.

Money set aside for bad loans rose 36 percent to 1.3 billion pounds and is likely to increase, said Hornby.

HBOS is a bank in the UK, where the long arm of FAS 157 reaches not. But come on, level with me please. Don’t you really mean Level 3 here?

HBOS said it also marked down the value of so-called available-for-sale assets by 1.9 billion pounds, which is not reflected in earnings.

Not reflected in earnings? Why not? If theses assets were available for sale, why did the bank write them down by 2B pounds ($3.7B)? Probably because they couldn’t sell them Toto. If anyone happened to be keeping track of such things, this might be something to think about.

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