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UK banks could be forced to double the amount of cash they hold in reserve to get through the financial crisis, a leading City analyst warned today.
Despite raising billions of pounds to shore up their balance sheets, regulatory reform means British banks battered by the credit crunch will have to increase capital buffers to cushion them against future shocks.
Analysts at JPMorgan Securities, led by Carla Antunes da Silva in London, said they expected a 30% to 100% increase in capital requirements, depending on the state of the economy. Their research note forecast a capital deficit at Barclays of a whopping £12.8 billion even after the £12 billion raised from investors last year and the £8 billion sale of Barclays Global Investors.
JPMorgan said Barclays' takeover of Lehman Brothers' North American operations last year guaranteed significant gains for the bank.
“The Lehman acquisition is transformational and we see equities as potentially the most profitable unit, but that does mean significantly higher capital requirements going forward,” the note added.
On Royal Bank of Scotland, the analysts predicted a capital shortfall of £8.5 billion, up from £2 billion previously, but said its investment bank Global Banking & Markets was “a crucial part of the recovery”.
The note added: “Our loss estimates have been reduced significantly — by 31% in 2009 and 27% in 2010, but remain in large loss-making territory.”
