MarketLine Blog

Posts tagged to Banking

Another headache for RBS as European Commission probes plan to abandon Williams & Glyn sale

MarketLine

It seems like an eternity since the European Commission (EC) told RBS that it needed to divest of some of its banking operations as a result of receiving state aid in the form of a bailout. The EC argued that it would be unfair to enjoy such a position of power in the UK banking market (particularly in the SME segment) having needed such an injection of government cash. Almost nine years on from receiving that funding, the bank is no closer to any such divestment, having seen three separate… Read more

Brexit – the meaning of a messy divorce for the Euro area.

MarketLine

The lending channel between many industries and banks in the Euro area has been far from normal since 2008. This factor puts Britain in a better position to negotiate Brexit next year. The Euro area will embark on a period of further unprecedented slowdown by detaching itself from the world’s fourth largest economy. Credit to industries coming from the banking sector is key for the region to grow as the single currency area has a bank-based model as opposed to a capital market model. Debt financing to companies is largely… Read more

Donald Trump: Incoming president likely to create bigger mess than his hair

MarketLine

Donald Trump’s policy detail is rather thin, but based on multiple and contradictory things he has said on the campaign trail, shrinking of the state via both reduced tax income and federal spending while promising to build a border wall and renovate infrastructure, protectionist stances on international trade agreements while promising a Brexit Britain a comprehensive deal, an expansion of dirty industries at the expense of environmental regulation, and undermined central bank independence. Donald Trump’s election to the Oval Office was considered one of the most divisive and bitter elections… Read more

Trump’s win is good news for US economy

MarketLine

Donald Trump’s whole mantra during his campaign (as evidenced by his rather natty headwear) has been to ‘Make America Great Again.’ In order to do this, he knows he must make the US competitive on the global stage. He has pledged to reduce taxes heavily for low and middle income Americans and also to make sure that the wealthy (including corporations) do not pay too much as that undermines jobs. This should help boost the currently questionable level of job creation and to increase spending power, which should in turn… Read more

China’s banking industry: BIS scaremongering unwarranted but warning signs must be heeded

MarketLine

China’s economic growth has been slowing for a while now and while it remains healthy, there are concerns over the state of the country’s banking industry. Non-performing loan (NPL) rates have been increasing, with some of the country’s biggest banks seeing a surge in that particular metric. Bank of China and ICBC saw noticeable increases in their NPL rates during 2015, necessitating greater allowances for credit losses, while Agricultural Bank saw something of a surge from 1.54% to 2.39%, with the retail and wholesale industry the main cause for concern…. Read more

Williams & Glyn: RBS abandons spin-off IPO plan

MarketLine

To comply with European Commission State Aid requirements, RBS agreed in 2009 to a series of restructuring measures that were to be implemented over a four year period. One of these measures was the divestment of the RBS branch network in England and Wales and the NatWest branches in Scotland. This was scheduled to be completed by 2013, but an extension was granted after the original bidder, Santander, pulled out. A consortium known as Corsair stepped into the breach and invested, facilitating a later sale or, more likely, an IPO…. Read more

Block Chain Tech The DAO becomes the largest crowd funding campaign in history

MarketLine

Block Chain technology is seen as the key breakthrough which allowed the development of Bitcoin, the enormously successful cryptocurrency. The Block Chain stands as proof of all the transactions on the network and the block is the live part of a Block Chain which records all of the recent transactions. When completed the individual block goes into the Block Chain as permanent database or ledger. Each block is arranged properly in chronological order and connected to the block next to it. Looking at the banking system for instance, this would… Read more

Williams & Glyn: Future of RBS spin-off in doubt as launch delayed

MarketLine

Overly ambitious growth strategies initially brought great success for RBS and the company was seen as the darling of the stock market, consistently delivering double digit growth. However, the company swelled to such a size that its assets were twice the size of the UK economy and a woefully ill-advised acquisition of ABN Amro in 2007 as part of a consortium tipped the bank over the edge as it took ownership of a large amount of toxic assets. The weakness was ruthlessly exposed during the global crash of 2008/2009 and… Read more

A new dynamism for major European economies

MarketLine

The expansion of household debt in Europe in the 1980s, 1990s and 2000s was unprecedented by historical standards and the economic growth of European countries has become partially dependent on it. The numbers from the Bank of International Settlements (BIS) and Marketline analysis reveal that the outstanding credit from the banking system to European households increased more than 170%, in nominal values, from US$4tn in 1995 to more than US$ 11tn by the end of the 2000s. In the UK alone, household debt is running at US$2.4tn which represents an… Read more

Market maturity and intense competition forces banks to expand overseas

MarketLine

Overseas expansion is a key trend in the global banking industry as many major players look to reduce their reliance on mature and intensely competitive domestic markets. The push for overseas expansion is beginning to kick start M&A activity within the sector. CCB, ICBC, Credit Agricole, and Mitsubishi UFJ have all engaged in M&A deals that involve the purchase of at least a stake in a non-domestic player since 2013. As explored in detail in the MarketLine case study Top ten global banks: An analysis of financial performance, growth opportunities… Read more

Rise in non-performing loans potential time bomb for China’s swollen banks

MarketLine

As measured by total assets, four of the ten largest banks in the world are now headquartered in China. As the Chinese economy has swelled, so too have the balance sheets of its largest banks. This has spurred great growth in operating incomes and net profit as demand for credit has soared. However, there are signs that the curse of non-performing loans (NPLs) that wreaked such havoc with the West’s banking system could potentially strike China, a ticking time bomb if left unaddressed, with several economic sectors posing a significant… Read more

Prosperity based on debt

MarketLine

A large number of European governments were keen to embark on the deregulation of the financial sector in the 1980s. The deregulation in Europe was initially proposed in the United Kingdom by the Prime Minister Margaret Thatcher and, subsequently, adopted by a large number of European governments. It opened up the doors to the addiction of European consumers to credit. Waves of bank loans and mortgages became available to consumers and it quickly turned into a necessity. Later on, it became clear that banking in Europe turned into a highly… Read more

Lloyds success to pave way for RBS sale?

MarketLine

The UK government has sold another tranche of the shares it owns in the Lloyds Banking Group – one of the banks controversially bailed out during the financial crisis. The latest round of sales, aimed to capitalise on prices close to the 12-month high, have coincided with Lloyds’ announcement that it will commence paying dividends for the first time since the bailout on the back of a fourfold increase in the group’s underlying profit. UK Financial Investments (UKFI), the entity set up to manage government stakes in bailed-out banks, had… Read more

Bank of America and Citigroup: Poor Q4 results see share prices fall sharply

MarketLine

Yesterday (January 15), Bank of America (BoA) and Citigroup announced underwhelming results for Q4 2014 that seemingly caught the market off guard and caused share prices in both banks to fall. Bank of America announced Q4 revenues of $18,955m, down 12.7% on the same period a year earlier. Net income also fell from $3,439m in Q4 2013 to $3,050m, a drop of 11.3%. This has impacted preliminary 2014 full year results as revenue has fallen 5.2% on a year-on-year basis, and net income by a staggering 57.7%. Citigroup’s results did… Read more

Commonalities between Japan, United Kingdom, US and the Eurozone – Fixing the Financial System but not necessarily the Economy

MarketLine

The Bank of Japan (BoJ) was the first central bank to adopt quantitative easing (QE) to fight the upsurge of a deflationary path in 2001. At that time, the feeble GDP reflected the collapse of aggregate demand following a financial crisis in the late 1990s. The most vicious side effect of a collapsing aggregate demand was a generalized decline in prices and production, which was already a reality in Japan at the beginning of the 2000‘s. In response to highly negative events, the BoJ launched the Quantitative Easing program (QE),… Read more

The rise, fall and rise of Bitcoin

MarketLine

The digital currency Bitcoin has experienced a surge in value in recent weeks, increasing rapidly since October to exceed a value of $900 for one unit on the Bitcoin exchange Mt. Gox. The value of Bitcoin fell to $125 after the closure of the Silk Road (a website where users could buy and sell illegal items using Bitcoin) by the FBI on October 2nd 2013, but has since rallied well to briefly reach $900 on November 19th, before falling to below $500. One of the reasons linked to this sudden… Read more

Islamic finance presents opportunities for US banks

MarketLine

Islamic, or more accurately Sharia-compliant, finance is a huge potential market for specialist providers and global banking giants alike. Estimates place the global Muslim population at 1.6 billion, equivalent to approximately 23% of the world total, this offers an excellent potential client base but the range of available Islamic finance products and services is largely under-developed. Some countries with majority Muslim populations, such as Malaysia and Saudi Arabia have relatively advanced offerings, and although there are signs that the market in Europe is finally taking off in earnest, North America’s… Read more

Banking regulator for 28-nation EU by November 2014?

MarketLine

Back in September 2012, the European Commission (EC) proposed a European Union (EU) banking regulator, which has come to be known as the Single Supervisory Mechanism (SSM), to oversee the 28-nation bloc’s banking sector. This week, the establishment of such a body moved a step closer. Lithuania’s Finance Minister (Lithuania currently holds the EU’s rotating presidency) Rimantas Sadzius announced yesterday that he was “very glad to note the adoption of this very important single supervisory mechanism package.” Michel Barnier, Commissioner responsible for internal market and services,  was even more enthused… Read more

Less scope for free market economics

MarketLine

The Prudential Regulation Authority was created to be an arm of the Bank of England and to promote the safety and the soundness of individual banks, building societies, credit unions, insurers and major investment firms. Ultimately, PRA will keep a very close eye on financial institutions to ensure that the bank bailouts of the last few years won’t happen again. The authority set up a 3% leverage ratio threshold, which forces banks and building societies to have at least £3 of own capital to support £100 of lending. Interestingly, after… Read more

Moving people, moving money: Western Union and the remittance market

MarketLine

In July 2013, Barclays, one of the UK’s largest retail banks, announced its decision to close the accounts of money transfer companies, which allow customers in one country to receive funds locally from a sender in a different country. The reason given by Barclays was that some of these companies had insufficient checks in place to prevent the transfer of funds to terrorists and other criminals. However, the resulting outcry revealed just how vital such remittance services are for many people in the developing world. A petition to the UK… Read more

Lloyds Banking Group and Royal Bank of Scotland: The big sell-off?

MarketLine

This week, both Lloyds Banking Group (Lloyds) and Royal Bank of Scotland (RBS) have announced encouraging results for the six months to the end of June. The two banks, which are 39% and 81% government-owned respectively, returned to profit and this has led to speculation that the UK government may look to divest its interests. Lloyds’ results came first on Thursday (August 1st) and showed a £2.13bn (approximately $3.38bn) pre-tax profit. This signals a welcome return to form for one of the country’s so-called ‘Big Four’ banks and represents a… Read more

Banking sector in Europe. Never ending recovery.

MarketLine

The Eurozone is still facing considerable financial instability according to a European Central Bank press release from July 13th. Austerity policies adopted by many European governments in the aftermath of the Greek crisis of 2010 increased its financial instability by suppressing the nascent economic recovery seen between 2009 and 2010. Fortunately, the prolonged assistance from the European Central Bank (ECB) reduced the level of bankruptcies in the financial system to a bare minimum. Fiscal policies, most notably tax increases and government cuts, that came in to force after the Greek… Read more

Is monetary expansion fuelled by Quantitative Easing boosting the construction sector in the United Kingdom?

MarketLine

The Bank of England has flooded commercial banks with money in the aftermath of the financial crisis. The aim of its policy has been to inject money into the economic system and consequently increase investment and consumer spending. How does monetary expansion work? Since March 2009, the bank has bought government debt from pension funds, commercial banks, insurance companies and non-financial firms. Commercial banks selling their government debt to the central bank in exchange for cash should be depositing more money into their own reserves. This extra capital should then… Read more

China: State induced liquidity crunch in order to allocate funds better

MarketLine

Xinhua, the official news agency of the People’s Republic, belatedly explained monetary policy action taken last Thursday, as “It is not that there is no money, but the money has been put in the wrong place”. Although no explicit statement of government policy or intent, Xinhua, considered as an official – in all but name – news agency of the state, explained that the reason the Chinese central bank has allowed interbank lending rates (Shibor) to surge on Thursday was because although banks, the stock market, and SMEs all lacked… Read more

Stephen Hester steps down as RBS Chief Executive

MarketLine

Royal Bank of Scotland (RBS) Chief Executive Stephen Hester is to step down it was announced yesterday, causing much speculation over the reasons behind the decision. In recent months, Hester had spoken of his desire to see the project through to completion and so the surprise announcement begs the question of whether he was pushed. Hester succeeded disgraced former CEO Fred Goodwin in September 2008 after the bank was forced to go cap-in-hand to the UK government to ask for a £45bn capital injection. Hester has been central to the… Read more

Santander Becoming a Major Force in the UK Banking Sector

MarketLine

Banco Santander is one of the largest banking groups in the world with operations in Europe and the Americas. The group has a powerful presence in the territories in which it operates and the UK is no exception. Santander UK plc is a wholly-owned but separately capitalized subsidiary of Banco Santander. This case study shows how the Spanish giant has risen to a position of prominence in the UK banking sector. Santander has established a significant presence in the UK predominantly through acquisition. The process began back in 2004 with… Read more