It’s payback time as banks make profit
Posted on August 9th 2010
It’s a bumper season for the banks once more with several of the UK banks reporting not only that they are back in the black but things are looking positively rosy. No doubt the politicians will start the whole bonus saga all over again and how these reckless bankers should punished for their sins, but I for one am pleased to see such positive news.
Given that the banks led us into a global recession it makes sense that they will be the first ones to emerge from the rubble. Most, although not all, benefited massively from lower bad debt provisions as the performance of their mortgage portfolios started to improve. HSBC’s American business which was one of the first to start reporting large write-downs when the subprime crisis first began, at last is starting to show some positive signs.
For me, the whole problem started in the US and will almost certainly only truly end when the US housing market starts to recover; so the HSBC results relating to their American business are significant. I can see a scenario where if the banks keep reporting lower bad debt provisions, investors will start to regain some confidence in RMBS.
As I have said on many occasions the UK mortgage market needs new money before it can see any meaningful growth or indeed stabilisation and it is possible that a run of positive news from the banks might just be the catalyst we need. Let’s keep our fingers crossed that the bankers repay their debt by making good profits and channelling them into new lending.
