Home / Payments / Reviewing 2008: what’s your £1, €1, $1 worth now?

Reviewing 2008: what’s your £1, €1, $1 worth now?

At this time of year, I always spend a
while reviewing the year that has passed.  Last year, I lingered over
discussions that reviewed retail
, capital
and payments.

To be honest, I don’t need to do
that this year as the year has been over-shadowed by one thing:


Can the bank make it through the

To illustrate this
point, here's the value of £1 invested in UK banks on 12th December 2007, one
year later:

HBOS               8p
RBS                 11p
Lloyds TSB        26p
HSBC                75p

In fact, £1 invested in money centre banks generally would
have seen a loss of 43.66% leaving 53 pence to spend.

Not a good year by any means.

There are now so many banks that we have to raise a glass to
and sing “Auld Lang Syne" (should old acquaintance be forgot), which would
include Bear Stearns, Lehman Brothers, Washington Mutual, Wachovia, Indymac
Bank, Fannie Mae, Freddie Mac, Bradford & Bingley, Alliance & Leicester,
Dexia, Fortis, Hypo Real Estate … and Iceland
of course.

Who would have thought so
many names and even countries would have been so decimated at the start of the

We have also seen some major
changes in market structures with JPMorgan, Bank of America, Citi and Wells
Fargo all swallowing large chunks of banking weaknesses in the US markets with
the incorporation of some of these names, whilst the UK has seen HBOS and Lloyds
TSB come together and Germany has seen Commerzbank take on Dresdner.

Who would have expected such megabank
name mergers?

But then the only
reason why half these banks are still standing is thanks to billions of
investments from the governments of the world, from the £500 billion investment
by the UK Treasury, to the €500 billion of the German Finance Ministry to the
$700 billion American TARP plan.

none of this is working because Tier 1 Capital is still complete dross, as I
outlined in depth in the Parliamentary
on Monday.

Who would
have thought that investments of over $2 trillion overall would still leave the
banks under-capitalised and under-funded?

Maybe it is outlined in the predictions of the IMF, who tagged
the original ‘subprime crisis’ losses to be between $350 and $400 billion in
late 2007. These estimates were increased to $1 trillion in April 2008, as the
markets liquidity started to dry up. And this was increased once more by the
Bank of England in October 2008 to $2.8

And it still does not
seem like enough, especially when the market jitters arising from the Lehman
Brothers collapse were caused by the Credit Default SWAPS exposures that no-one
could baton down. However, some say its $55 trillion whilst others say it’s a
net:net miniscule amount.

I will make
some forecasts for next year in my first week back on the Finanser in January 2009,
and here were the five firm predictions I made at the start
of this year

#1: A Top 10 US
Bank will be majority-owned by a foreigner
#2: A bank will
be fined over $1 million for non-compliance with MiFID
PayPal reaches 200 million users, Facebook 100 million and a major bank launches
a social network for consumers
#4: There will be another
major European merger of banking goliaths
#5: Green
Computing becomes a hot topic

let’s see what happened.

A Top 10 US Bank will be majority-owned by a foreigner


A top 10 US bank is definitely owned by a foreigner … just
that the foreigner isn’t just the Middle Eastern Sovereign Wealth Funds but the
American Government. I’d say that’s a foreigner if ever I saw one.

#2: A bank will be fined over $1
million for non-compliance with MiFID


A bank
hasn’t been fined over MiFID for non-compliance by breaching best execution or
similar, and they’re unlikely to be in the near future. Instead, forget about
such things completely and focus upon the G20’s new Supervisory

It is not to say that MiFID, the PSD or related areas are
no longer important, but any regulator who tries to beat up the banks over such
trivia right now might as well go and be a jobsworth somewhere else.

#3: PayPal reaches 200 million
users, Facebook 100 million and a major bank launches a social network for


In 2007, eBay took pride in showing
PayPal’s rapid rise of users, but their last quoted numbers were 164
registered users in Q1 2008.

Then they started quoted active users instead, as many of
these registered accounts were dormant. An active user is someone who has made a
PayPal payment in the last quarter. In Q1 2008, they had 60 million active users
compared to 36 million the year before.  By October
, “global active registered accounts increased to 65 million,
representing 19% year over year growth.” So that’s half-right.

For Facebook, I got it totally wrong. I
forecast 100 million users because they were up at around 65 million at the end
of 2007 and MySpace dominated the world with over 220 million users. But 2008
provide to be the year that Facebook wiped the floor of them all, with 140
million active users now, growing at over 600,000
new users
 every day!

several banks launched social network services, including Visa’s Business
in Facebook, HSBC’s
Business Community
 and SEB’s Benche. There are more
examples out there, but these were the most notable of 2008.

#4: There will be another major
European merger of banking goliaths

True, but like the Facebook forecast this was way off-beam. I
thought there might be a Santander play, or a BNP Paribas buy-up, but Caisse
d'Epargne / Banque Populaire in France, Commerzbank / Dresdner and Deutsche Bank
/ Postbank in Germany along with HBOS / LloydsTSB take the biscuit.

there was Santander moving from Abbey to Bradford & Bingley to Alliance
& Leicester in the UK, along with loads of other smaller

There were also the massive American mergers of Wells Fargo /
Wachovia, JPMorgan with Bear Stearns and WaMu, and Bank of America with Merrill
Lynch was unbelievable.

There’s even been the news that banks are
merging inside, with Citi bringing commercial and investment banking into one
(about time).

And that
ignores the death of investment banking, with all top five American stand-alone
investment banks no more.

Who would
have thought it?

#5: Green
Computing becomes a hot topic


So what?

Looking back, I thought I was being
a bit edgy in my predictions back in January, but I was way off beam and too
conservative if anything.

we have all been getting on with SEPA, the PSD, einvoicing, supply chains and
all that stuff I’ve also blogged about this year, much of which pales into
insignificance when you think about the issues and losses the markets have

So next year, my main
prediction is that your £1, €1 or $1 invested in a bank will make money. It
can’t get any worse than we saw in 2008.

I'll share a few more in

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

Check Also

What does the FCA think about blockchain?

In mid-December 2017, the UK’s Financial Conduct Authority (FCA) published a really interesting 32-page paper …