The UK government is today under pressure to begin disposing of taxpayer share stakes in Royal Bank of Scotland and Lloyds bank after this week's results season began. The stakes are now in profit to the tune of around £5 billion although there is a growing consensus that now may well be the time to begin reducing UK taxpayer exposure. So is now the right time to sell?
The big five banks in the UK this week reported combined profits of £15 billion in the first six months of 2010 in sharp contrast to the massive losses reported last year. Despite the fact that UK taxpayers now stand on a £6.7 billion paper profit on investments in Royal Bank of Scotland and Lloyds Bank there is still concern about the level of liquidity in the UK business and consumer markets. So are UK banks doing enough?
Royal Bank of Scotland, the majority taxpayer owned banking operation, has today posted a £9 million profit for the first six months of 2010 compared to a £1 billion loss in the same period last year. However, all is not as it seems if you look below the surface.
Even though Barclays Capital, the investment arm of Barclays Bank, saw a reduction in external revenue streams during the first six months 2010, compared to the first half of 2009, the company has increased its contribution to the remuneration pool by 18%. This is the liquidity pool from which remuneration and bonus payments are funded and has been a bone of contention for those working outside of the UK banking arena.
Barclays Bank, the UK banking giant, has today reported a profit of £3.95 billion for the first six months of 2010. While the vast majority of the profit, £3.4 billion, came from the company's Barclays Capital investment arm there has been a general improvement in trading within the UK banking sector. So can we now expect liquidity to improve?
Banking giant Standard Chartered, which has significant operations in the Far East, is rumoured to be looking at a potential relocating of its headquarters out of the UK. As with a number of UK banking operations, the company feels that the introduction of banking taxes and "heavy" regulations on the UK arena has reduced its competitiveness in the short term. So is this a real threat from Standard Chartered?
BP has today issued a statement suggesting that the Gulf of Mexico oil spill, which has seen millions of barrels of oil leak into the sea, is coming to an end. The company has carried out a process known as "static kill" which effectively places tons of heavy mud on the existing cap to permanently seal the troubled oil well. However, it is only now that the real process begins for BP which could see the company pay out billions upon billions of pounds of compensation aside from the cost of the cleanup operation.
Today's revelation that taxpayer share stakes in Royal Bank of Scotland and Lloyds bank currently boast a £3.4 billion profit has prompted the question from many in the UK investment arena as to whether the UK government should now consider exiting the banking sector?
The UK government today stands with a profit of around £3.4 billion on investment stakes in Royal Bank of Scotland and Lloyds bank. After reporting profits of around £1.6 billion the Lloyds bank share price has increased to 74p giving the UK government a net gain of £3.17 billion on its initial £17 billion investment. As we await Friday's figures from Royal Bank of Scotland the government currently stands at a profit of £119 million on its £45 billion investment.
Yesterday's profits from Northern Rock surprised many in the UK investment arena with the group rebounding from its worst years in living history to a profit of £200 million. The group has effectively been split into a "good bank" and a "bad bank" although the performance of the two separate operations could not be more different!
