Wednesday 13 October 2010

More Bank capital raising

First off the blocks, just like last year, is Standard Chartered. A mere £3.5 billion capital raise to ostensibly help it prepare for Basle III; the rules of which do not come into play for another 3 years.

This in turn has caused a fall in the shareprice of Barclays Bank - rumours in the City suggest that Mr Diamond's toy needs about £8 billion to meet the Basle III requirements.

Lloyds has a pretty bullet proof balance sheet and RBS, well RBS does not really but then is a state entity. What becomes of the bank if it needs to raise new capital is very bad news for shareholders, already down to only 17% ownership.

making banks safer by forcing them hold more money is a good thing; extra good is that it seems the capital markets are now strong enough to digest a new funding round. It is a very good sign of a turn in the Credit Crunch that markets can do this...if only they could do it without Government intervention at all.


Dick the Prick said...

Think Lloyds have just screwed a few folk round here ooop North. When the shit was hitting the fan they bullshitted staff that they had ambitions to become a leading financial software house only now to be told they're being out-sourced to India.

I dunno - I guess it's not the bank's business to be responsible for their employees for that long, everyone can read the writing on the wall but....I dunno. Gotta separate politics from economics at some point. Ho hum.

Electro-Kevin said...

What do you think will happen with interest rates ?

CityUnslicker said...

Dick - Outsourcing of IT jobs is going to continue as long as the cost ratio is better than 10:1. Even though the Indians are not as good, they are not 10x worse. Only exchange rate changes are going to sort this.

That maybe sooner than people think with UK doing QE and India having 10% wage inflation.

E-K - All the doom mongers ahve said interest rates are shooting up. Good luck with that, the economy is on its knees still so interest rates are staying where they are. More QE is actually increasing the negative rate. Eventually they will need to go up, but in Japan they have been 0% for a decade. I don't think that will happen here, but you can't rule it out. My personal bet is that I took out a floating rate mortgage this year and I won't swithc to a fix until I see rates going up in a solid trend.

Anonymous said...

Interest rates are something of a conundrum to me now. What used to happen was that the BoE would set their rate, in the hope that it influenced the market, but the rate banks borrowed at was Libor.
Looking forward to next year, a lot of banks have to try to roll over their bonds, if nobody wants to buy the new bonds at the low interest rates of today, then rates would go up. If the BoE buys them, then inflation rockets, but would the interest rate go up?
My prediction for next year is that mortgages will be unavailable and we enter the twilight zone. Interest rates won't matter as there will be no credit.