Propping up the Rock
Amid all the hubbub over Northern Rock’s nationalisation you may not have noticed that there was some good news for UK banks this week – but you should take it with a massive pinch of salt.
Barclays’ results on Tuesday found the banking giant awarding itself a comparatively clean bill of health. True, there was a £1.6bn writedown of creditrelated securities and the bank did warn (as if anyone needed to be reminded) that 2008 would be a “less benign year”.
But by the standards of the current credit crisis, the loss of a billion or so just isn’t that bad. And a 10% hike in the dividend seemed to confirm the upbeat tone. The real trouble is, as Anthony Hilton pointed out in the Evening Standard, that Barclays’ Swiss peer Credit Suisse “made a statement remarkably similar in tone to that of Barclays” merely days before it “discovered” a pile of assets that had been overvalued by £1.5bn.
So, as Hilton says, “whom do you believe?” I’m inclined to side with the sceptics. Banks are facing pressure from so many angles that I can’t believe we won’t see a fresh stream of writedowns and nasty surprises throughout this year.