News from the financial sectors in Spain and the Canary Islands
In August each year UK banks publish their reports on the first half of the year.
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30.08.2010 - Between them, Britain’s five biggest banks reported over £15 billion in pre-tax profits for the first six months of the year. This is good news for shareholders and the markets in general. It’s good news for British taxpayers who are propping up banks to the tune of around £1 trillion. Unfortunately it’s unlikely to make any difference to savers who will probably keep receiving a pittance in interest in spite of having helped the banks back to profit.
Most analysts had expected lower profits, particularly since banks generally struggle to improve profitability when interest rates are low. However, their current approach of paying savers low returns at the same time as charging borrowers inflated interest rates would appear to be serving the banks very well.
Lloyds Banking Group
Lloyds, which is 41 per cent state owned, reported a pre tax profit of £1.6 billion for the first half of 2010, compared to a loss of £4 billion last year. This was double what most analysts had expected, with some now predicting annual profits of £4 billion.
Royal Bank of Scotland
RBS, which is 84 per cent state owned, reported pre-tax profits of £1.14 billion, up from £15 million a year ago. The group made an operating profit of £1.58 billion, compared to a loss of £3.35 billion last year.
Chief executive, Stephen Hester, acknowledged that the bank had only, “broken even” as its net profit was £9 million after an unusually large tax bill of £931 million.
HSBC
HSBC survived the financial crisis without receiving any direct government support and has now posted a pre-tax profit of £7.1 billion for the period – a 121 per cent increase from last year.
HSBC banking group made gains in every region except North America, with the strongest growth coming from Asia where lending grew by 15 per cent. Just over half the profits came from investment banking.
Barclays
Barclays reported a £3.95 billion pre-tax profit, up 44 per cent on last year.
Performance was boosted by a sharp drop in bad debts, though the bulk of the profits came from its investment banking arm Barclays Capital which made £3.4 billion – a 225 per cent rise in profits.
Earning profits
While a drop in bad debts has helped banks recover, the improvement in Lloyds’ and RBS’ net interest margin – the difference between what they receive from borrowers and pay out to savers, expressed as a percentage of interest-bearing assets – was a significant boost to their profits. Banks have arguably been able to post massive profits to the detriment of savers and borrowers. While savers generally only receive a little over the Bank of England base rate – often not even enough to keep up with inflation – borrowers are paying many multiple of times in excess of the rates that banks borrow at.
If you would like your capital to work for you, rather than for the banks, ask an experienced and qualified wealth manager like Blevins Franks to discuss alternatives based on your circumstances, objectives and risk profile.
To keep in touch with the latest developments in the offshore world, check out the latest news on our website www.blevinsfranks.com
By Bill Blevins, Financial Correspondent
Blevins Franks
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