Barclays profits

StevieJ

Generali wrote: »

There may well be a lot of money to be made buying bank stocks. There's definitely a risk there though.

Agreed but I think the potential reward was well worth the risk at these levels.

Generali

StevieJ wrote: »

Agreed but I think the potential reward was well worth the risk at these levels.

I suspect you'll be right, especially if you are investing across a range of banks. I also suspect you'll have some scares along the way.

Of course the big risk is a wholesale nationalisation of the banking industry.

StevieJ

Generali wrote: »

I suspect you'll be right, especially if you are investing across a range of banks. I also suspect you'll have some scares along the way.

Of course the big risk is a wholesale nationalisation of the banking industry.

I just don't see it, but I do see the govt eventually making a profit from the investments.

Generali

StevieJ wrote: »

I just don't see it, but I do see the govt eventually making a profit from the investments.

I think the Government will do everything possible to avoid it. I think it will be a very close thing.

I don't see the Government making a profit as they are trying to impose mutually exclusive policies on the banks - lending more and staying solvent. Also, the British Government (both Lab and Con) has a lousy investment record.

Wookster

Generali wrote: »

Of course the big risk is a wholesale nationalisation of the banking industry.

I have to agree with that.

We just don't know how much worse things will get - at the moment the credit crunch seems to have pretty much only involved write downs on US based loans, not really very much by way of UK based activites.

My feeling is that Barclays could be exposed more than they think they are.

Don't they have by far the biggest exposure under various derivatives (CDS iirc) than any other bank? I recall a figure of £2.4 trillion being bandied about.

Generali

Wookster wrote: »

I have to agree with that.

We just don't know how much worse things will get - at the moment the credit crunch seems to have pretty much only involved write downs on US based loans, not really very much by way of UK based activites.

My feeling is that Barclays could be exposed more than they think they are.

Don't they have by far the biggest exposure under various derivatives (CDS iirc) than any other bank? I recall a figure of £2.4 trillion being bandied about.

I think GBP2,400,000,000,000 is the total size of the derivatives market measured by notional value although I'm not certain.

I'd be very wary about investing in banks. If they bounce back then there's a killing to be made and given current share prices, the down side is clearly limited. My feeling is that the threat of nationalisation hasn't been avoided yet.

The banks' fate is clearly linked to the economy. From the BBC's website today (Economics section - link):

Job prospects in 2009 'alarming'
FSA gloomy over economic outlook
Japan corporate bankruptcies soar
US jobless highest since 1992
German industrial output plunges
More companies going bust
Gulf states to see fall in growth
UK manufacturing declines sharply
Car sales fall further in January
Irish jobless claims hit record


It's hard to see any headlines which are good news for banks on there.

IveSeenTheLight

Generali wrote: »

The banks' fate is clearly linked to the economy. From the BBC's website today (Economics section - link):

Job prospects in 2009 'alarming'
FSA gloomy over economic outlook
Japan corporate bankruptcies soar
US jobless highest since 1992
German industrial output plunges
More companies going bust
Gulf states to see fall in growth
UK manufacturing declines sharply
Car sales fall further in January
Irish jobless claims hit record


It's hard to see any headlines which are good news for banks on there.

So by default, would you agree with the BoE / governments decision to reduce interest rates to try and kick start businesses and thus the economy?

Wookster

IveSeenTheLight wrote: »

So by default, would you agree with the BoE / governments decision to reduce interest rates to try and kick start businesses and thus the economy?

Well here's a question for you: If interest rates are so low here, where will banks borrow money from to lend to businesses and consumers, as we are competing in international money markets for limited funds available and other areas (e.g. the Eurozone) have higher interest rates?

IveSeenTheLight

Wookster wrote: »

Well here's a question for you: If interest rates are so low here, where will banks borrow money from to lend to businesses and consumers, as we are competing in international money markets for limited funds available and other areas (e.g. the Eurozone) have higher interest rates?

Barclays announce +£6 Billion in profit with £600 Million in bonuses
RBS reported to be paying £1 Billion in bonuses

Maybe start with not paying bonuses and using the profits to re-invest

Or borrow from the US / Japan / Switzerland etc where the rates are loweer
http://www.telegraph.co.uk/finance/economics/interestrates/3796827/US-interest-rates-slashed-as-low-as-zero.html

http://business.timesonline.co.uk/tol/business/economics/article5372103.ece

http://www.fxstreet.com/fundamental/interest-rates-table/

Kev09

Wookster wrote: »

Well here's a question for you: If interest rates are so low here, where will banks borrow money from to lend to businesses and consumers, as we are competing in international money markets for limited funds available and other areas (e.g. the Eurozone) have higher interest rates?

This is the reason the currency is falling against other currencies there is no incentive to save here, however it is not a problem for banks as they are going to continue to perpectually borrow from the government which in turn creates a different set of problems!