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Banks face raising new round of capital

Alliance Trust is warning that the outlook for banks remains worrying with uncertainty over the strength of balance sheets and the poss- ibility that more capital may have to be raised.

The firm considers the UK banking sector is experiencing a deterioration in credit quality as economies slow worldwide.

It says banks that depend on the UK market with high ratios of loans to deposits are in a weaker position than those with more global exposure.

It says global players, such as HSBC, have been able to avoid the full impact of the credit crunch through their exposure to the Asian markets. But it believes that this shelter may not last as Asian economies are reliant on the US as an export market.

Alliance Trust global financials analyst Tim Gibbens says despite UK banks raising more than £20bn of capital over the last year, further moves to shore up balance sheets cannot be ruled out.

He says: “The key areas to monitor now are the strength of banks’ capital and liquidity positions as well as their exposure to commercial property and specialist mortgage markets where prices may weaken further.”

Gibbens adds that when conditions eventually stabilise, banking stocks are likely to see a sharp but short-lived bounce. He says: “Tough fundamentals such as a relative lack of growth options, pressure on margins from increased competition and still stretched capital positions will soon reassert themselves.”


End of a trend

With children returning to school, summer holidays little more than a memory and evenings beginning to shorten, it is to be hoped that the listless drift of the market might transpose into something more positive. With sterling weak, there seems reason to expect shares to deliver more robust performance and there is a feel of a floor developing.

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By Fiona Holmes, proposition communications manager Having reached a certain age (it’s the new 40 by the way), I’m having to come to terms with the fact that my peers and I aren’t as immune from illness or death as we’d like to think. That’s the problem with 30 being the new 20 and 40 […]


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