Has the recovery in the UK banking sector run its course?
News that Qatar Holdings will be reducing its significant shareholding in Barclays bank has prompted many investors and analysts to consider whether the recovery in the UK banking sector has run its course for the time being. There is no doubt that the sector is well and truly over the worst but whether we will see the sector continue to move ahead in the short to medium term is very much open to debate.
There are a number of issues which are coming to the fore which include reduced liquidity in the mortgage market, increased unemployment in the UK, an unpredictable property market as well as pressure from the UK government to reduce significant banking bonuses. There is also a long-term situation with regards to the government shareholdings in Lloyds bank and Royal Bank of Scotland, which will at some stage be sold to third parties or else placed within the market.
Despite the fact that UK banks have received billions upon billions of pounds of taxpayer's money, both directly and indirectly, liquidity in the commercial marketplace is still very thin on the ground and many people are still struggling. Until we see a return to "traditional" liquidity levels it is hard to see how the sector can maintain its recent strength.
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