Insights from the UK and beyond
In the blink of an eye it look as if the City is “booming” again after Barclays and HSBC announced buoyant investment banking earnings on Monday.
Both banks were hit by a surge in bad debts as the recession took its toll on borrowers, but analysts said that resurgent debt and foreign exchange trading and market share grabbed from troubled rivals fuelled the largely positive results.
Barclays announced an eight percent rise in profits for the first six months of the year to almost three billion pounds, while HSBC reported profits of the same amount, though this was half what they made during the same period in 2008.
The results have led to speculation that some City workers will once again receive bumper bonus packages just months after the banking sector was bailed out by the taxpayer.
Banking stocks led the FTSE decline after HSBC’s plan of a deep-discount rights issue and embattled life insurer AIG announcement of a $61.7 billion quartely net loss, the biggest in U.S. corporate history.
The Treasurer of the United Reformed Church pointed to the relative stability of HSBC — despite market speculation about its capital adequacy — compared with the parlous state of some of its rivals.
First Direct has pulled the shutters down on new mortgage business. Albeit a temporary move, it is yet more unsettling news for scores of homeowners coming to the end of cheap deals. Such a move is unprecedented, but perhaps comes as little surprise, given that the lender has been market-leading for quite some time. With pricing more or less 0.5 percent below that of its nearest competitor, the influx of new business that has created a huge backlog is understandable.
The mortgage market is moving at an alarming pace: First Direct’s decision to suspend new borrowing and push business to its parent company, HSBC, is yet another example of lenders taking action to manage volumes. Others have used other means of stemming inflows — increasing rates, withdrawing products and restricting their best rates to lower loan-to-value customers, as the fallout from the credit crunch continues.