Landmark’s Blog
Banking Crisis Take 2
Published on 15th September, 2009 at 11:36 by Eric Mowinski B.Sc.
It is likely that we will see phase 2 of the banking crisis in 2010.
One or two readers have commented on the rather pessimistic view I have taking in recent issues. I wish I could be a little more optimistic especially as markets have risen significantly since their lows of March 2009 and politicians and the press are talking about the early signs of recovery.
Sadly I cannot as the current signals are hiding the dangers ahead. On a more positive tone for any investors who can position themselves correctly over the next 2 years opportunities will abound.
One of the real problems relates to the stability of the banks. In recent months we have seen some of the major UK banks returning to profit whilst the state owned banks continue to lose money. In the US there are problems.
Jeff Spencer (M&G credit analysis team) outlines a worrying picture. The small banks in the US are under real pressure due to the weakness of their lending books focusing on real estate assets and non performing loans. The number of banks on the Federal Deposit Insurance Corporation “problem list” rose by 36% in the first quarter.
The large banks in the US and UK are making a high percentage of their profits from investment banking returns which are by their nature higher risk. For many European banks they have yet to face up to the write offs on defaulting companies in Eastern Europe.
If the banks falter again all investment classes will follow.
Posted under the following tags: bankingcrisis, investments, recession.
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