Britain's best two banks pull ahead

published 13 November 2009

"HSBC and Barclays lead 2-tier UK banks," said the FT's Patrick Jenkins. This week HSBC said third-quarter pre-tax profits would be "significantly ahead" of last year. Barclays reported pre-tax profits of £1.6bn, virtually unchanged from the previous quarter, and resumed paying dividends for the first time in a year. In the first nine months of the year it raked in £4.5bn. All this is a stark contrast to the third-quarter numbers published last week by RBS and Lloyds, who are both still loss-making, said Jenkins. "Britain's banks have polarised between successful commercial operators and struggling part-nationalised ones."

What the commentators said

"The main point from the Barclays and HSBC third-quarter numbers is that impairment charges seem finally to have peaked," said Jeremy Warner in The Daily Telegraph. But the sector is not "out of the woods". Even if the banks are right to be optimistic about the worst of loan losses being over, we can't expect a significant jump in lending anytime soon, as Allister Heath explained in City AM. A new problem is looming. The maturity of banks' wholesale debt has shortened over the past few years. As a result, Moody's reckons UK and US banks will need to refinance over $2trn of maturing debt by the end of 2012. "The magnitude of the task will mean higher financing costs, which will be passed onto borrowers." This "will put pressure on banks to shrink their balance sheets, limiting the growth of credit".

It may be just as well, then, that "we've lost the appetite for credit", said The Daily Telegraph's Damien Reece. Note, for instance, that less than half of the overdraft facilities for HSBC's commercial banking customers are drawn. Consumers are also increasingly cautious. The upshot is that "demand [for credit] is not there, whatever the government might say". And it "can't make Britain borrow" partly because it's already "done far too much of that itself".