UK Banking Sector Watch: Project Merlin, or Wizard of Oz?

Thursday, Feb 10 2011 by
4
UK Banking Sector Watch Project Merlin or Wizard of Oz

Is it win lose or draw in the Government's agreement with the banks? The Chancellor George Osborne has just published details of Project Merlin. He appears to have won at least some of his arguments and now wants the country to move on as reported here in the Telegraph.

Speaking to the House of Commons, Osborne said: "Let us as a country confront this hard truth - anger and retribution will not bring one percentage point of growth or create one job. The anger will remain and we must never make the same mistakes again, but Britain must move from retribution to recovery."

But is the country ready to listen?

Among other things, the Merlin agreement suggests total bankers' bonuses for 2011 will be lower than for 2010 and lending to business should increase to £190 billion in 2011, from £179 billion in 2010 with fulfillment of at least some these requirements linked to the bank executives' pay.

The agreement is summarised neatly on Citywire here.  Unsurprisingly Shadow Chancellor Ed Balls is certainly not ready to move on describing the project as a "complete shambles" and the concessions offered by banks as "pitiful".  

"We have gone from Project Merlin to the Wizard of Oz," he said.

 Special Offer: Invest like Buffett, Slater and Greenblatt. Click here for details »

But are the comment boards ready to move on? The answer is a resounding 'no'. On the Telegraph Guy Bailey is typical. "They've got away scot free, with us picking up the tab and we're to suck it up lest we hurt their feelings? This Coalition isn't long for the earth," he writes. kavajo stands out, bringing up Osborne's tax sting yesterday, but whether he is supporting banks or just criticising Osborne is hard to tell. He writes: "Hypocrite! Yesterday he stings the banks for a £2.5bn levy and which is to become permanent. Today he says it is time to stop banker-bashing. Hard to do as long you keep taking their money."

The commenters on Citywire, many of whom tend to be small businessmen and women are concerned about the details. They ask whether the lending is net or gross and query instances where a bank might try and translate an overdraft agreement into a loan. Sean Kelly comments: "Is this net or gross lending? If all that happens is the banks lend £190 billion to businesses but call in £200 billion of business credit that's £10 billion out of the economy." 

Richard Ross asks: "I'm not here questioning the rights or wrongs of a term loan over a 'permanent' overdraft but I wonder how much of that 'new' lending to small businesses will simply be restructuring of existing borrowing? My guess is a huge proportion."

Meanwhile BBC business editor Robert Peston's blog makes for interesting reading. In his blow by blow commentary, Peston notes that Santander has only signed up for the lending commitments and not the rest of the deal while two banks have taken advantage of the news deluge to tell the world what bonuses they are paying their chief executives.

Royal Bank Of Scotland (LON:RBS) , which is mostly owned by taxpayers, will pay Stephen Hester £2.04m but in shares he can't sell for three years. Lloyds (LON:LLOY), which is part-owned by taxpayers, will pay Eric Daniels £1.45m, a paltry amount when compared with Barclays Bob Diamond but substantially more than the average wage. 

Will the public be in the mood to move on from retribution when they realise?

To receive our free weekly email sign up here.   


About the Author's Website

MindfulMoney Profile Image Promotional
MindfulMoney

We are a social news and knowledge network that reflects the viewpoints, interests and conversations of the online financial community. Our aim is to provide investors with context and perspective, which we do by drawing on a wide range of sources, from organizational psychoanalysts to individual reader comments and key… ...read more or visit website »


Disclaimer:  

The information on this site is provided for your general information and use and is not  intended to be relied upon by you in making or not making any investment decisions.

It is recommended that you seek independent financial advice before making any investment decisions.


Do you like this Post?
Yes
No
4 thumbs up
0 thumbs down
Share this post with friends



The Royal Bank of Scotland Group plc (RBS) is a holding company of a global banking and financial services group. The Company operates in the United Kingdom, the United States and internationally through its two principal subsidiaries: The Royal Bank of Scotland plc (the Royal Bank) and National Westminster Bank Plc (NatWest). Both the Royal Bank and NatWest are clearing banks. In the United States, the Company’s subsidiary Citizens Financial Group, Inc. (Citizens) is a commercial banking organization. The Company’s business segment include UK Retail, UK Corporate, Wealth, Global Transaction Services, Ulster Bank, US Retail & Commercial, Global Banking & Markets (GBM), RBS Insurance, Central items, Non-Core Division and Business Services. In May 2012, The Paragon Group of Companies PLC announced the acquisition of further unsecured consumer loans, through its Idem Capital Securities subsidiary, from the Company. more »

Share Price (Full)
364.2p
Change
-3.3  -0.9%
P/E (fwd)
11.3
Yield (fwd)
n/a
Mkt Cap (£m)
41,576

Lloyds Banking Group plc, is a holding company. The Company is a financial services group providing a range of banking and financial services, primarily in the United Kingdom, to personal and corporate customers. The Company operates in four segments: Retail, Commercial Banking, Wealth, Asset Finance and International and Insurance. Retail provides banking, mortgages and other financial services to personal customers in the United Kingdom. Commercial Banking provides banking and related services to business clients, from small businesses to large corporate. Wealth, Asset Finance and International provides private banking and asset management and asset finance in the United Kingdom and overseas and operates the Company’s international retail businesses. Insurance provides long term savings, protection and investment products. In April 2014, Lloyds Banking Group PLC acquired Barons Holdings Spa & Resorts Ltd. more »

Share Price (Full)
76.72p
Change
0.4  0.5%
P/E (fwd)
9.5
Yield (fwd)
3.7
Mkt Cap (£m)
54,820



  Is Royal Bank of Scotland fundamentally strong or weak? Find out More »


1 Comment on this Article show/hide all

Fangorn 10th Feb '11 1 of 1

I'm personally astounded that Eric Daniels is getting "any" bonus after running Lloyds into the ground.

Rather than state owned banks paying bonuses they should instead pay some dividends (what better way fior the taxpayer, the majority shareholder, to start getting a return on their investment). As to those banks that haven't relied on state capital to survive, what they pay to their employees is their business frankly.

Most of the employees at RBS are lucky to have their jobs thanks t o the taxpayer bailing them out. They should count themselves lucky. At the time of the financial crisis there was also alot of talk about how teams could walk to employers paying better packages - highly dubious as nearly every bank wasn't hiring, even if the individual/team looking to move has a great reputation/earnings ability.

| Link | Share

What's your view on this article? to Comment Now

 
 
You are feeling neutral

Use the £ sign in front of a ticker to turn £VOD into Vodafone PLC

You can track all @StockoChat comments via Twitter


About MindfulMoney

We are a social news and knowledge network that reflects the viewpoints, interests and conversations of the online financial community. Our aim is to provide investors with context and perspective, which we do by drawing on a wide range of sources, from organizational psychoanalysts to individual reader comments and key blogs.  We're about sharing knowledge and information in an engaging and jargon free style, and we hope you join the conversation. more »



Stock Picking Tutorial Centre



Stock Picking Simplified

Stockopedia takes your stock picking to the next level with cutting edge Stock Reports & Screening tools.


Get started
or Take a Tour to find out more.