Moody's believes worst still to come for UK banking sector

Posted: Monday, 14 September 2009 @ 10:24

After my article in last month's ezine, you wouldn't expect me to be surprised by this but there seems to be a growing consensus that the worst is not yet over.

This is an extract from a report on Bloomberg:

U.K. banks are less than half way through posting 240 billion pounds ($398 billion) of losses on loans and securities, a reflection of the U.K.’s economic weakness, according to Moody’s Investors Service Ltd.

British banks are likely to record 130 billion pounds of losses in the next 12 to 18 months, in addition to 110 billion pounds lost since the beginning of the credit crisis, Moody’s said today in a report.

The company “expects the sustained weakness of the U.K. macroeconomic environment to feed through into higher loan arrears with ensuing pressure on profitability and capital,” it said.

The U.K. has provided about 1.4 trillion pounds of support to banks, becoming the biggest shareholder in Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc as it seeks to shore up capital eroded by writedowns. British banks have raised about 120 billion pounds of capital from the beginning of the credit crisis to mid-2009, Moody’s said.

Moody’s has a “base case scenario” of a 40 percent peak- to-trough decline in house prices and a 60 percent decline in commercial property from the peak, the report said.

Blog by Gary Cousins
Gary has been providing legal advice to shareholders, directors and business owners for over 25 years. Specialising in dispute resolution Gary is based in Birmingham with clients throughout the UK and overseas. View profile
Call Gary on +44 (0)121 778 3212 or by email
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