So having started the year trying to save their jobs, the government has ended it with a populist round of high tax banker bashing, clamping down on the bonus culture. The plight of the financials has been one of the most interesting features of the markets through 2009 mainly because of the disparity in the fortunes of the main protagonists. Whereas Standard Chartered is on the verge of posting record profits of £3 billion for the year, Royal Bank Of Scotland Group Plc has just finalized the details of its participation in the government’s asset protection scheme (APS).
The UK banking sector has evolved into a two tier system with the differentiating factor of course has been exposure to bad debt and the resulting government bail outs. Whilst HSBC, Standard Chartered and Barclays are posting profits and still pay a dividend, Lloyds Banking Group and RBS remain in the red.
Soon to be 84% government owned RBS is now the most bailed-out bank in the world however on a more positive note the £282 billion of assets it will insure under the APS is lower than the £325 billion agreed back in February.
Both effective nationalisation and the excessive APS premiums were things that Lloyds Banking Group on the other hand was keen to avoid. Whilst the former leaves the bank open to government intervention and constraints on things such as salaries and dividends, Lloyds’ loan book (thanks largely to HBOS) was deemed as higher risk than that of RBS and would have cost the bank around £16 billion to insure.
Instead Lloyds’ way out has come via a £20 billion plus capital raising. By tapping into the private sector rather than the APS, the bank will avoid the forced disposals which RBS must undertake and with the European Union competition officials taking a more lenient stance the bank will still maintain a dominant position in the UK retail banking sector, being forced to trim its share of mortgages and current accounts by only 5 percent.
Whilst this is a positive for Lloyds, the bank remains a couple of steps behind the big 3.
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Standard Chartered has weathered the financial crisis better than rival banks as a result of its stronger capital and liquidity positions and its exposure to faster growing Asian economies. Whilst Barclays has recently reported a £1.1 billion net profit for the third quarter HSBC has recently stated that profits for the same period were "significantly ahead" of last year and that bad debts had now fallen to their lowest level since the second quarter of 2008.
To summarise, 2009 has been a year of recovery for the banks, one in which they have all mapped out the journey back to full health…. getting there is a different story.
Whilst HSBC and Standard Chartered are well set thanks to their emerging markets exposure, those with UK focus are set to find the going tough. Increased regulation will erode profits and with economic growth labouring the possibility of further toxic loans and company failures appearing during 2010 can not be ruled out.
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Barclays PLC (Barclays) is a global financial services provider engaged in retail banking, credit cards, wholesale banking, investment banking, wealth management and investment management services. The Company’s operations include its overseas offices, subsidiaries and associates. The Company operates in eight segments: UK Retail and Business Banking (UK RBB), Europe Retail and Business Banking (Europe RBB), Africa Retail and Business Banking (Africa RBB), Barclaycard, Barclays Investment Bank, Barclays Corporate Banking, Wealth and Investment Management, and Head Office and Other Operations. In April 2012, its investment banking division is combining its corporate finance and mergers and acquisition groups. In July 2012, it sold 90.4% of Sweden-based carbon project developer Tricorona back to the Company's management. In February 2013, Kotak Mahindra Bank Ltd acquired the business loans portfolio of the Indian arm of Barclays Plc. more »
The Royal Bank of Scotland Group plc (RBS) is a holding company of a global banking and financial services group. The Company operates in the United Kingdom, the United States and internationally through its two principal subsidiaries: The Royal Bank of Scotland plc (the Royal Bank) and National Westminster Bank Plc (NatWest). Both the Royal Bank and NatWest are clearing banks. In the United States, the Company’s subsidiary Citizens Financial Group, Inc. (Citizens) is a commercial banking organization. The Company’s business segment include UK Retail, UK Corporate, Wealth, Global Transaction Services, Ulster Bank, US Retail & Commercial, Global Banking & Markets (GBM), RBS Insurance, Central items, Non-Core Division and Business Services. In May 2012, The Paragon Group of Companies PLC announced the acquisition of further unsecured consumer loans, through its Idem Capital Securities subsidiary, from the Company. more »
HSBC Holdings plc is a banking and financial services organization. It serves around 89 million customers through four global businesses: Retail Banking and Wealth Management, Commercial Banking, Global Banking and Markets, and Global Private Banking. Its network covers 85 countries and territories in six geographical regions: Europe, Hong Kong, Rest of Asia-Pacific, Middle East and North Africa, North America and Latin America. On March 31, 2013, Enstar Group Ltd’s subsidiary completed the acquisition from Household Insurance Group Holding Company of HSBC Insurance Company of Delaware and Household Life Insurance Company of Delaware, as well as its three subsidiary insurers. more »
