The biggest losses ever

The world of UK banking is expected to be shaken,
not stirred, later this week when the Royal Bank of Scotland announces the worst results in UK banking history with a £1 billion loss for
the first six months of 2008. 

 

This follows similar bad news from Northern Rock (£585 million/$1.6 billion loss), Lloyds TSB (profits down 63%), HBOS (profits
down 51%), HSBC (profits down 28%) and others.

 

Much of this is due to a major hike in costs of
business, due to interest rates and lack of funding as liquidity dries up. For example, HBOS’s cost-income ratio rose by
10% from 39.9 to 49.6 during over the last year.

 

But then it’s also the one-year anniversary of the
credit crunch on 9^th August. Hopefully
one-year into the crisis we will start to see some good news coming out of the
gloom.

 

On the other hand, some media think the crisis
will get worse as credit turmoil spreads to debit. For example, the Times reports that Corporate
Britain owes £545 billion to their banks and, as more corporates default with
bad debt, this will add to our woes.

 

Funnily enough, I found an interesting white paper
by a certain Ben Bernanke asking this very question: “is there a corporate debt
crisis?”

 

The only thing is that he wrote the paper in 1988.

 

What goes around comes around.