So having started the year trying to save their jobs, the government has ended it with a populist round of high tax banker bashing, clamping down on the bonus culture.  The plight of the financials has been one of the most interesting features of the markets through 2009 mainly because of the disparity in the fortunes of the main protagonists.  Whereas Standard Chartered is on the verge of posting record profits of £3 billion for the year, Royal Bank Of Scotland Group Plc has just finalized the details of its participation in the government’s asset protection scheme (APS).

The UK banking sector has evolved into a two tier system with the differentiating factor of course has been exposure to bad debt and the resulting government bail outs.  Whilst HSBC, Standard Chartered and Barclays are posting profits and still pay a dividend, Lloyds Banking Group and RBS remain in the red.

Soon to be 84% government owned RBS is now the most bailed-out bank in the world however on a more positive note the £282 billion of assets it will insure under the APS is lower than the £325 billion agreed back in February.

Both effective nationalisation and the excessive APS premiums were things that Lloyds Banking Group on the other hand was keen to avoid.  Whilst the former leaves the bank open to government intervention and constraints on things such as salaries and dividends, Lloyds’ loan book (thanks largely to HBOS) was deemed as higher risk than that of RBS and would have cost the bank around £16 billion to insure.

Instead Lloyds’ way out has come via a £20 billion plus capital raising.  By tapping into the private sector rather than the APS, the bank will avoid the forced disposals which RBS must undertake and with the European Union competition officials taking a more lenient stance the bank will still maintain a dominant position in the UK retail banking sector, being forced to trim its share of mortgages and current accounts by only 5 percent.

Whilst this is a positive for Lloyds, the bank remains a couple of steps behind the big 3. 

Standard Chartered has weathered the financial crisis better than rival banks as a result of its stronger capital and liquidity positions and its exposure to faster growing Asian economies.  Whilst Barclays has recently reported a £1.1 billion net profit for the…

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