Bank Results: BarCap Saves Barclays, HSBC Calls Bottom, UBS Slightly Less Bad, Rock Down Til 2010
UBS keeps on getting sucked down into the gaping maw of failure, with news today that its net losses for the last quarter reached 1.4bn Swiss francs. At least its not as bad as the 19.7bn they lost in Q4 last year, but considering how well their other investment banking peers are doing, it’s not a very impressive performance. And now they’ve also got to wait for more bad news and scrutiny on Friday, when the details of their settlement with the American tax man comes through regarding their harbouring of US tax evaders. The bank lost 16.5bn francs through its private banking operations, as investors fled fearing exposure after the settlement goes through.
There are some optimistic notes though – their actual income was up 45% after trading went much better than last year, and their capital levels are healthy, plus a large chunk of the losses are from one-off restructuring.
Northern Rock is also facing ongoing losses – it announced a £724m loss for the first half of the year, and said that impairment charges for bad loans will carry on throughout 2009, though its underlying losses after one-off charges is actually decreasing.
Nevertheless, they might not want to look at the results of Barclays and HSBC that were released yesterday, lest they feel a gnawing pit of inadequacy. Massive profits at Barclays’ investment bank, BarCap, filled in the gaps created by losses in its retail division, resulting in £2.9bn pre-tax profit. Barclays aren’t taking any chances though – since they’re projected to lose as much as £9.6bn in bad debts this year, they’re not about to start paying out these profits to shareholders, instead shoring up their capital levels to deal with the ongoing recession toxicity. Also, the botched sale of iShares considerably curtailed the profits at their Barclays Global Investors arm.
The profits at BarCap however doubled to £1.06bn, closing in on the tumbling profits at the retail division, which were down 44% to £1.26bn. Just as Goldman recorded record profits after it sucked up assets from various failed operations, Barclays is citing its acquisition of Lehman assets last autumn as helping their profits grow so much so quickly. The fact that the bank is free from government control means it also has an edge when courting investment. Their success also validates Alastair Darling’s recommendation that investment and retail arms of banks not be split apart from one another.
The news last month that our old chum Roger Jenkins, BarCap’s biggest earner, was to leave for California to set up his own financial advisory body has gone rather quiet; perhaps we’ll hear something in the next few days, and see him sail out on a high.
Meanwhile HSBC made $5bn in profits, though it too was being hampered by bad debts – its plays in the US housing market were still taking their toll, and the bank has cut its dividend by 56%. Stephen Green, their chairman, was upbeat though, saying: “It may be that we have passed, or are about to pass, the bottom of the cycle in the financial markets”. If the big round of profit taking this morning is anything to go by (and with the stock market as an ever less reliable indicator of financial health its not that much to go by), investors don’t fully believe that we’re recovering just yet.
Obviously all this news has led to tabloid screaming about “a return to the greed that brought the economy to its knees”, when all the noises coming from the top of Barclays and HSBC are of relative prudence over the coming months. Compensation though, with BarCap staff set to make up to £200,000 bonuses this year, is a separate issue. Just as with Goldman, the profits raked in from newfound assets are turning into short-term bonuses faster than reform can keep up. Expect a rightful storm of criticism come year-end.
Posted by Ben Beaumont-Thomas in Hot Money | August 4, 2009 1:48PM |