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Results week beckons for UK banks

This week sees a range of UK banks announcing their profits at a time when it is very difficult to know what to do. As a UK bank, do you announce exceptional profits and thank the taxpayer for helping out or do you play down the situation and promise to increase lending in the future?

In many ways the UK banks cannot win this week because if they show signs of recovery in their profitability then many will ask why lending has not been forthcoming and if they show little progress over the last few months then the UK government and the banking sector will be criticised for wasting taxpayer's money. The bottom line is that there is finance available, there is demand but unfortunately it looks as though the risk reward ratio (something which has been discussed on numerous occasions by the UK government) is still skewed towards a higher risk than many would like to see.

In a classic chicken and egg situation, do the banks wait until the economy recovers before increasing lending or do they take a chance that the worst is over and increase liquidity in the market place?

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