Financial Update Week in UK
First Published: August 11, 2009 ADawnJournal.com
It is a sign of the times we are living in that more people than ever are actually sitting forward when the TV news switches to finance, as opposed to flipping the channel to find something less boring instead. With the global impact of what was, after all, a global credit crisis, people now want to know about finance. It affects jobs, housing, and after a while it has an impact on everything, from the personal to the political. This week has seen a slew of financial results emerging in the United Kingdom, one of the first countries to be hit by the “credit crunch”, and one of the bell-weather free market economies of the world. To call them a “mixed bag” would be about right…
As the week started two of the biggest banks operating in the UK announced major profits in the billions. Barclays and HSBC each raked in profits for the first six months of the year in the region of CA$5.5 million. Given that it was in the banking sector that the fire started in the UK, two of their major banks reporting such positive results early on is encouraging indeed. The sign of a recovery? Maybe not so much. The other half-year results which emerged this week seem to be somewhat more circumspect, if not downright pessimistic. Among them are some tales of woe, some tales of qualified hope, and a whole lot that can only be described as “hmmm” results.
Bad for the UK government is the news that Northern Rock, the ailing bank it took over (in the aftermath of the UK’s first run on a bank in many, many years) has posted further losses – in the region of CA$1.35 billion. How much of this loss-making is down to how the bank is being run, how much is down to the existing recession conditions and how much is down to the now tattered reputation of the Newcastle-based bank is currently hard to tell. Given that every UK taxpayer now has a stake in the bank, the financial results of Northern Rock are of interest to everyone in the country – and it would be fair to say they aren’t turning cartwheels with joy right now.
Then there is the story of Lloyds HBOS. Twenty or more years ago, there were four banks called Lloyds, TSB, Halifax and the Bank of Scotland. Then Lloyds merged with TSB to create Lloyds TSB, and Halifax and the Bank of Scotland created HBOS in the same way. After a government-backed takeover of HBOS by Lloyds TSB at the end of last year, the buoyant Lloyds TSB found that HBOS’ debt level was far greater than first thought, and this week they announced financial results which showed their first-half numbers to be in the negative margin. Time will tell how they ride out this storm, especially with the Bank of England announcing an additional £50 billion of “quantitative easing”, essentially adding new money to the economy.