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Guest KingCharles1st

So How Are Banking Profits Being Hurt By Them Not Being Able To Lend?

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Guest KingCharles1st

Just wondering how this will affect things over the net few months- will they be bothered at all- or seriously hurt?

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Just wondering how this will affect things over the net few months- will they be bothered at all- or seriously hurt?

Amazingly, net lending for housing is still positive.

With positive net lending and wide spreads between saving and lending rates, I think the banks will appear strongly profitable if they dont admit to full writedowns.

VMR.

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Just wondering how this will affect things over the net few months- will they be bothered at all- or seriously hurt?

What I suspect we'll see is massively increased writedowns on loans offset by a strong income performance. But this will mask the true picture.

1/ Banks will writedown as much as they can, the reason being they want to be seen to be absolutely squeeky in terms of their capital.

2/ they need to write down as much as they can so that it will offset what will be absolutely stellar income performances. The high street banks are the only game in town, they know this, and they have accordingly massively widened their margins... yes they have increased losses but their income will have increased at a much faster pace.

3/ I suspect they may declare samll dividens if at all to show health.

4/ I suspect they look to unload govt debt that hasn't been capitalised as fast as possible.

The real bug picture is that they will OVERSTATE their credit writedowns through accruals...... and their massively increased income will allow them to do this whilst still showing a profit...... once we are getting out this mess (which from their perspective won't be too long now) they will encourage the govt to float them back in the market and then guess what..... they will restate thiose overstated credit writedowns, they'll still have massively increased margins... and this will create a bonanza for the new shareholders that should by rights have been a taxpayers bonanza....... when these banks are sold.. the buyers are going to make a vast amount of money.... and it probably won't be you and I as the stakes will be offered privately rather than as a genuinely public offering.

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Just wondering how this will affect things over the net few months- will they be bothered at all- or seriously hurt?

Can we just be really clear. All the major UK banks are lending at the same level or above the levels of 2007. What are now missing are the sub-prime lenders and they won't be coming back in a hurry. They were the significant chunk that fuelled the boom and included the likes of MX and Kensington.

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Just wondering how this will affect things over the net few months- will they be bothered at all- or seriously hurt?

I think the difference between interest paid to savers and interest from loans / credit cards is such that they are making a lot of money.

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Can we just be really clear. All the major UK banks are lending at the same level or above the levels of 2007. What are now missing are the sub-prime lenders and they won't be coming back in a hurry. They were the significant chunk that fuelled the boom and included the likes of MX and Kensington.

Thats a very fair assumption. Although whether its absolutely right I am not sure as wholesale funding had a large part to play in high street banks startegies as well.

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Thats a very fair assumption. Although whether its absolutely right I am not sure as wholesale funding had a large part to play in high street banks startegies as well.

Fair point. I suppose it depends where you draw the line as to what is a major high street bank. I suppose that Bradford and Bingley were, however they also had the MX arm which as you say, was funded pretty much by the wholesale markets.

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Amazingly, net lending for housing is still positive.

With positive net lending and wide spreads between saving and lending rates, I think the banks will appear strongly profitable if they dont admit to full writedowns.

VMR.

What do I know about anything but did read this from the FT yesterday:

UK lending suffers setback

By Daniel Pimlott, Economics Reporter

Published: June 29 2009 11:28 | Last updated: June 29 2009 11:28

Lending to consumers and businesses suffered a setback in May, highlighting the threat to nascent green shoots from weak levels of credit.

Net lending secured on dwellings did not grow during the month, the worst performance since records began in 1993, the Bank of England said. The annual rate of lending growth of 1.3 per cent was also the slowest pace on record, and compares with a 11 per cent growth rate before in late 2007.

The slowdown in lending secured on dwellings came amid a slower than expected increase in new mortgage lending and a continued fall in remortgaging. New mortgage approvals rose by 223 to 43,414 in May, the smallest increase since January.

“The minimal rise in mortgage approvals in May underlines the continued fragility of the housing market,†said Seema Shah of Capital Economics. “At this rate, mortgage approvals are unlikely to return to levels which historically have been consistent with stable prices until late next year.â€

And this was the Times version:

Weak mortgage lending hits UK housing recovery

Hopes of a recovery in Britain's battered housing market were dealt a setback today when new data for May revealed a weaker than expected number of mortgage approvals and the lowest rise in lending on record.

A total 43,414 mortgages were approved in May, just up from 43,191 in April, the Bank of England said. Analysts had expected a figure closer to 46,000.

In a further illustration of the continued fragility of the market net mortgage lending during May rose by just £324 million, a third of the level in April and a tenth of the amount loaned at the same time a year ago. The increase was the weakest since records began in April 1993.

As I keep saying, my intuition keeps giving me the image of the precariously placed pack of cards level after level built up and up and up and the ..........last................card...................oh dear.

As Richard Lambert, the director general of the CBI, said on yesterday:

the British economy is “undergoing a massive course of steroids†but it is not clear yet where sustainable growth would come from once the medication has worn off

“Monetary and fiscal easing can’t go on forever,†he said

He cited the damaged credit markets, the inevitable fiscal squeeze and the uncertain outlook for household spending as reasons “why there is a real question as to whether the green shoots which everyone has been spotting lately will turn out to have any sustainable rootsâ€.

He is not the only one questioning if the roots have green shoots the CML and BOE have said the same, and I read somewhere that politicians are no longer allowed to speak of "green shoots" only "sustainable recovery".

Steroids themselves whilst easing the pain are also very toxic . Perhaps this is a time when we need to concentrate less on stimulating growth and green shoots and consider the root and whether the whole plant needs to be dug up and replaced with something more able to sustain unquestionably healthy growth

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the British economy is “undergoing a massive course of steroidsâ€

Is the UK economy going to grow a huge pair of tits ?

Might as well, to match the pair we have running the economy.

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What do I know about anything but did read this from the FT yesterday:

I think you already know all you need to in order to make a good assessment of UK house price market. Let the journalists generate their daily noise, the big picture moves very slowly.

VMR.

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But lending at 3% over base rate has been the historical norm. It really is back to normality here.

They seemed to make money somehow at lending below BR with discount trackers etc. I dont get how they do that, given at the time they all seemed to lend to each other thru interbank lending.

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