The Banking Sector

David_Evans

What do people think about the prospects for the UK banking sector in general?
I've noticed a few things:

High Street branches are closing.
More is moving online towards apps etc.
Customer loyalty is not valued and is falling.
More new start up banks - with newer IT systems.
Existing banks with large amount of real estate to maintain - acting as a drag on profits.
The banks don't want savers' money. They only make money by selling mortgages and over-priced funds etc.
Legacy IT systems a potential issue still (eg TSB).
Continued problems with fraud - leads to political intervention (plus pressure to maintain banking for disadvantaged / high risk customers - money mules etc)

Very close alignment of the banking sector to the govt and the property market (could be a benefit for them?).

I've heard a lot of commentators argue that 2008 is in the past, banks better capitalised now and maybe under-priced etc.
But I'm not convinced.
I see an industry under pressure from new IT advances.
I think HSBC wants to quietly leave the UK and head back to Hong-Kong.

What do others think?

Would you buy banking shares now..??

John_G_Jones

What do you mean that you aren’t convinced on capitalisation? It’s all in the accounts, it is indisputable that the rules on capital have changed, and it’s not a number that can be hidden unless you are going to step into conspiracy territory and allege that people are misreporting their figures.

Thrugelmir

Banking faces challenges. Just like many other industries due to technology change etc. Likewise the decrease in the use of cheques and cash. Unlike other industries though banking requires a significant asset base to grow. This is a major challenge. The challenger banks therefore face the probability of being taken over before reaching a significant scale.

HSBC will maintain a major UK presence. Where ever it's brass plate is located. Growth will be in Asia in the decades to come.

Always a place in portfolios for well run finance operations. Steady if unspectacular profits.

David_Evans

John_G_Jones wrote: »

What do you mean that you aren’t convinced on capitalisation? It’s all in the accounts, it is indisputable that the rules on capital have changed, and it’s not a number that can be hidden unless you are going to step into conspiracy territory and allege that people are misreporting their figures.

I meant the problems to the established banks would come for other reasons (listed) - not due to the same as 2008.

John_G_Jones

David_Evans wrote: »

I meant the problems to the established banks would come for other reasons (listed) - not due to the same as 2008.

Possible, but I don’t think so. They are so much better capitalised now.

Some of the new policies have done damage, of course, such as ring-fencing and bonus caps, but even against these headwinds ai think that they will tend to do alright.

They should still be more careful lending money to people who are likely to default. There seem to be some badly aligned incentives as shown by people on some of the forums here having been able to access credit that anyone could see they had no intention of ever returning.

Thrugelmir

John_G_Jones wrote: »

There seem to be some badly aligned incentives as shown by people on some of the forums here having been able to access credit that anyone could see they had no intention of ever returning.

At least the regulators are slowly working their way through the industry. Mortgages, payday loans, perenial credit card balances, promotional interest free transfers etc. All takes time. Doesn't help those in the mire already though.

David_Evans

I think the new (online only) ''challenger banks'' may give the established High Street banks a run for their money (excuse the pun!)

Mainly because the lack of physical infrastructure needed to start a bank - as opposed to an oil company for example.

I think the established banks are lacking what Buffett would call an economic moat.

Thrugelmir

David_Evans wrote: »

I think the new (online only) ''challenger banks'' may give the established High Street banks a run for their money (excuse the pun!)

Compare the size of the banks balance sheets. Challengers face an uphill battle. Business banking is where the money is.

RBS grew from being a regional Scottish entity. To the largest bank in the world by acquisition. (With hindsight we see how indequate regulation was at the time!).

David_Evans

Thrugelmir wrote: »

Compare the size of the banks balance sheets. Challengers face an uphill battle. Business banking is where the money is.
.

True. Plus selling investment products (maybe less so, post RDR?)

Maybe another factor is how used to the idea of free banking the general public is?

Not many people would expect a depository to hold their gold bullion for free.
Yet we expect banks to keep ''our money'' safe for us, without paying them.
(Assuming you are not a borrower at all).

Thrugelmir

David_Evans wrote: »

Maybe another factor is how used to the idea of free banking the general public is?

That's very much a UK based concept. Internationally small monthly account management fees are the norm. As regulators squeeze excessive overdraft charges etc. Then the likelihood of monthly charging increases. As free banking isn't free. As banks recoup costs from someone.

John_G_Jones

Thrugelmir wrote: »

That's very much a UK based concept. Internationally small monthly account management fees are the norm. As regulators squeeze excessive overdraft charges etc. Then the likelihood of monthly charging increases. As free banking isn't free. As banks recoup costs from someone.

Most of my accounts aren’t free.

Revolut, Natwest HSBC and SocGen all charge for my main current account.

Coutts doesn’t, but that’s because they require that you lodge a huge chunk of money with them at effectively zero interest so they make the money that way instead.

I think it’d be pretty healthy for banks to start charging everyone; it’d stop people thinking that they are a free service or that the foregone interest on people’s £300 average balance actually covers all that the banks provide.