Oh the poor old banks. We should start crowdfunding them?

From the BBC just now:
Banking giant HSBC says its profits got a $1.5bn (£1.2bn) boost from the purchase of collapsed Silicon Valley Bank's British business (SVB UK).

Europe's biggest bank posted a pre-tax profit of $12.9bn for the three months to the end of March.
That is more than three times the amount it made for the same time last year.
In March, HSBC bought SVB UK for a nominal £1 ($1.25), in a deal led by the government and the Bank of England.

The London-headquartered lender said the profit included a "provisional gain of $1.5bn on the acquisition of Silicon Valley Bank UK Limited".

"We remain focused on continuing to improve our performance and maintaining tight cost discipline, but we also saw an opportunity to invest in SVB UK to accelerate our growth plans," group chief executive Noel Quinn said.

The bank also got a boost from the reversal of its plan to write-off $2.1bn due to the sale of its French business, as that deal may no longer be completed.
HSBC announced its first quarterly payout to shareholders since before the pandemic in 2019 and said it would buy back $2bn of its shares.

Lloyds interim update this morning included this on deposits - similar sentiment to that of NatWest but possibly helped by increase in commercial deposits.

“Customer deposits of £473.1 billion down £2.2 billion in the first three months of 2023, including a reduction in Retail current account balances of £3.5 billion, partly driven by seasonal customer outflows, including tax payments, higher spend and a more competitive market. This was partly offset by Commercial Banking deposit increases of £2.7 billion, including both targeted growth in Corporate and Institutional Banking and some short term placements.”

Otherwise a strong set of results, probably preempting a huge SP tumble!


“Robust business performance, supporting continued strong capital generation

• Statutory profit after tax of £1.6 billion (three months to 31 March 2022: £1.1 billion), with higher net income, partly offset by expected higher operating costs. Strong return on tangible equity of 19.1 per cent

• Net income of £4.7 billion, up 15 per cent, reflecting ongoing recovery and the higher rate environment

• Underlying net interest income up 20 per cent, primarily driven by a stronger banking net interest margin of 3.22 per cent in the three months to 31 March 2023, stable on the fourth quarter of 2022, and increased average interest-earning assets

• Other income of £1.3 billion, 6 per cent higher, reflecting continued recovery

• Operating costs of £2.2 billion, up 5 per cent compared to the prior year, based on higher planned strategic investment, cost of new businesses and inflationary effects. Low remediation charge of £19 million

• Underlying profit before impairment up 28 per cent to £2.5 billion, largely driven by strong net income growth”

I don't think the issue is the quantum of deposits it is what they are having to pay for them

I have been putting money in LLoyds and Barc at 6 and 5.5%. I have virtually nothing in my standard accounts which pay next to nothing.

Yes, the balances are holding up but what is happening to NIMs?

I know uk bank share prices haven’t exactly warmed our summer days, but there are those of us who firmly believe they have been oversold. This is from Proactive yesterday. Maybe Lloyds will pop through 50p again one day…!!

A top-down argument that banks are facing headwinds given a sharp slowdown in global growth and indicators and rates and credit quality near their best for the cycle is hard to ignore.

However, the fundamental analysis around resilience in income and credit quality suggests an oversold asset class which offers very significant total returns according to UBS.

In the UK, for example, the economy continues to post much stronger than expected growth, inflation and employment.

As a result, the second quarter should see better NII, (net interest income) no real bad asset formation and good capital generation, according to UBS.

Though it says this is probably backwards-looking, it does give a solid, undervalued foundation for dividends and buybacks.

“Given valuations, capital generation and balance sheet strength we are buyers of UK banks.”

On that score, it likes Lloyds Banking best. Barclays has work to do in getting its UK business in shape while NatWest is attractively valued but net interest margin guidance declines each quarter in 2023.

“The narrative at LBG [Lloyds] appears more constructive.”

Standard Chartered is the favourite among the international banks for UBS.

Shares in Lloyds were up 2.85% at 44p.

Completely uninvestable for the long term investor. After the GFC, they should have been nationalised and merged. HSBC should divest its UK business and relocate to Asia. Of course, we need to be careful what we say about them in case our accounts are closed!