Monday 4 March 2013
How's that UK Financial investment portfolio looking?
Lloyds Banking Group and RBS managed to make huge losses - in fact RBS managed the biggest loss since 2008. Now partly the way banks account for profit and loss on the value of their own debt is having too big an impact on results. Last year they all benefited to the tune of a couple of billion and this year they have given it all back.
So the banks are right to say this plays a big role in obscuring their underlying performance. This year what really killed Lloyds and RBS were the big fines for PPI and Derivatives mis-selling combined with the still ongoing process of unwinding all their poor loans from the boom.
HSBC and Barclays have more or less finished this process, so regulatory fines aside and a bit of re-org costs at Barclays and they are on track.
Some of the key underlying businesses at Lloyds and RBS too are showing good signs of recovery - the issue is that they still have plenty of toxic assets (far less than before, but still tens of billions and what it left is the more toxic stuff) to go. Plus bit re-org costs and the Government has forced them to end most of their 'casino' banking markets and trading businesses. Also they have pulled back internationally, where the economies are growing, to focus on the UK, where the economy is flat.
So, pity the taxpayers, it will be a long wait to get even a nominal return on investment. The best option still remains a giveaway to taxpayers of the shares, it will reduce the overhang and be a fillip to hard-pressed people across they land as they cash in a few hundred quid - who knows that might even herald the end of banker-bashing.
Waiting for the shares to hit a return point just won't work - the market will be aware of the over-hang and so any time the shares get near that price they will get a nose-bleed. Creative thinking definitely needs to be applied here.