The Banks are making money again, but are they lending?
David Boyd, Managing Director, PAD4U Letting Agents Manchester writes:
This week HSBC has recorded a near doubling of it's profits for the year, Northern Rock has also reported profits (on the loan book now owned by the Government), Barclays results are also likely to be impressive, whilst RBS should also return to profit. So why is this? The first reason is that "bad debts" on properties have not worsened due to lax monetary policy, but I also suspect at lot of it comes from 'Improved Margins'. 'Improved Margins' roughly translates to the banks ripping us off; mortgage rates hover around four to six percent (taking into account ludicrous fees added on to the mortgage), whilst Bank of England base rates remain at the historically low level of just half a percent. I therefore can't say I'm surprised that the banks have bounced back. And I won't discuss what's happening with overdrafts and premium account charges.
It is difficult not to be cynical regarding bank profits (and the return of bonuses for their staff) which have come either through Government subsidy or through lax monetary policy combined with "Improved Margins' from all of us. But the fact of the matter is it had to happen, it was predictable and sadly necessary. Without strong banks making good profits, rating agencies and the market would likely take a dim view of UK Ltd., and this could have had and adverse effect on all of us. So although I will not be toasting to the "success" of the banks I will be breathing a sigh of relief as the worse maybe behind us.
However, this is only true, and the dual refinancing of the banks both by us tax payers and us mortgagees, justified, if the banks begin to lend money back into the UK economy for small businesses and by increasing the availability of mortgage finance to those without huge deposits. If the banks fail to do this UK Ltd., is likely to suffer. Thus it is imperative that the coalition Government push the banks on our behalf to do this, whilst they maintain sensible financial prudence. The banks are still 'flapping' and 'panicking' and have not demonstrated that they have changed their spots as of yet. Instead they continue to advocate form filling as the answer (but with different numbers now) in the hope that they have found a better formula. Whereas the correct formula is to train staff, have sensible pay structures based on long term success and take account that they are lending to people not forms. Only when this happens will we see successful banks profiting from their abilities rather than our pockets.