Newspaper article The Evening Standard (London, England)

Weak Spots and Unspoken Bad News at the Banks; City Comment

Newspaper article The Evening Standard (London, England)

Weak Spots and Unspoken Bad News at the Banks; City Comment

Article excerpt

Byline: JOANNE HART

OVER the next few weeks, Britain's leading banks will be giving investors a feel for how they have done this year. It has been an unusual period. The overall economic situation has declined but bankers have consistently maintained that they are all right.

Traditionally, banks are a lagging indicator of bad times so executives may be telling the truth so far. They are bound to be uneasily aware, however, that the sanguine approach has a limited shelf-life.

Some are more vulnerable than others. HSBC and Standard Chartered are highly exposed to the Far East, which has barely recovered from the troubles of 1998 and is being hit by the US downturn.

Standard Chartered is particularly challenged because it specialises in emerging markets and does not have the spread of businesses of its larger rival. Barclays has a more domestic focus but it has a large number of corporate clients, at least some of whom are going to be hit by the economic slowdown. Personal customers too are going to find it hard to pay their bills.

Royal Bank of Scotland is in a similar situation, although its profits could be cushioned by the savings from its NatWest deal.

HBOS will have to hope Bank of Scotland's bulging corporate loan book does not throw up any horrors following the merger with Halifax.

Lloyds TSB and Abbey National, which reports on third-quarter trading tomorrow, focus on personal customers who tend to be less dangerous in difficult times.

Even so, Lloyds has a big insurance exposure and Abbey has its controversial treasury division, which made an unexpected [pound]64 million provision at the half year.

All the big banks, therefore, have weak spots yet most pundits have failed to take them fully on board.

There is a view within the industry that estimates for next year are out by at least 20% and even this year's forecasts are too high. …

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