Will UK consumers benefit from a recovery in the banking sector?
As we have covered over the last few days, the UK banking sector is set to report a strong return to profitability in the reporting season which begins this week. However, even though the headlines will quote the profitability over the last quarter and the last half year, there is still a long way to go before UK banks return to anywhere near their former financial strength. There is still an ongoing programme of improving balance sheets and improving reserves, which still has some way to go.
As a consequence, even if the most optimistic of profitability figures are announced this week it is highly unlikely that we will see a flood of new liquidity into the consumer and business markets. Banks are still very much concerned about the UK economy which has appeared on the verge of a recovery on numerous occasions only to falter at the last minute. The higher the profits from UK banks the more pressure the UK government, regulators, consumers and businesses will put on them to increase liquidity but sadly these demands may fall on deaf ears in the short term at least.
There will be plenty of comment, plenty of controversy and plenty of discussion about the forthcoming bank reporting season, make no mistake about that!
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