The Mortgage Finance Blog

With the half-year results for the main UK banks in, there are two very different ends of the spectrum, large profits and large losses with no middle ground at all.

Barclays were the first to announce their figures and announced nearly £3bn of profits for the first six months of the year. One important factor to note is that more than £1bn of that came from its investment are Barclays Capital (Barcap), that bought failed US investment bank Lehman Brothers. Barclays is one of the two UK high street banks that have rejected offers of help from the government.

HSBC reported pre-tax profits of $5bn (£2.98bn) that was about half the figure from the same period last year. The fall was in the main due to significant write-offs, primarily in its US consumer lending businesses. Like Barclays, HSBC saw significant increases in revenue from its investment banking activities.

The nationalised bank has reported further losses, reporting a figure of £724m for the first half of the year. Many critics have blamed the government’s insistence that Northern Rock paying back its loans from the taxpayer as quickly as possible for the current figures. The bank’s mortgage book has nearly twice the average rate of loans 3 or more months in arrears. This has been blamed, in part, on the policy of incentivising borrowers to leave the bank. As only the “good” borrowers were able to leave and remortgage elsewhere, the net results was to make the mortgage book perform more poorly.

The Lloyds group, which bought beleaguered bank HBOS in January, made a loss of £4bn in the first half of 2009. The vast majority of this loss was as a result of a £13.4bn write down of its assets, 80% of which came from HBOS. The UK owns 43% of the Lloyds Banking Group.

It would appear that banks that are part or fully state owned are making a loss, while those that have not needed external intervention are making a profit.
This really shouldn’t surprise anyone. Those banks that needed to go cap in hand to the government had underlying issues of capitalisation. Given the huge loans doled out by the government it is not a surprise that these institutions are struggling to turn their businesses around. However Lloyds’ losses came from write-downs and investors are cautiously optimistic that this may be the end of the bad news for Lloyds. Similarly with Northern Rock starting to lend to mortgage customers again and at competitive rates, there is some hope that the bank can return to profitability in the future.

The full details on the results from all of the banks can be read on the BBC website.