Morning:
8°c
Are we any further down the road to recovery in the banking industry? Ask me that question in a year's time, when we've finally come to realise the shape of this recession and I will give you the answer.
The truth is that by then you will already know. We all will. If it's a double-dip, God help us. By then, RBS may be as good as dead and buried, requiring another £8 billion in new equity from the Government. Then the attention may turn to Lloyds, which, fresh from signalling its ability to escape the Government Asset Protection Scheme today, found the going unexpectedly tough and had to be effectively nationalised after all.
All that is for the future, but it's hovering, like a great spectre, over the slew of announcements made this morning. In some respects, we can take heart from how far we've travelled since the credit crunch began. Then it appeared as though all banks were going to be consumed by the monster with the seemingly unsatiable appetite for things marked “sub-prime”. But that hasn't happened. Our two biggest banks, HSBC and Barclays, have stayed relatively clear of the conflagration — a bit dented here and there but otherwise unharmed.
Which leaves the next two in terms of size: RBS and Lloyds. Of course, to the fury of Lloyds's shareholders there should have been five large banks, not four; and theirs should have been joining HSBC and Barclays on the A list. But the Lloyds board thought they knew better and went for the merger they'd always wanted to make, combining the Black Horse with the Halifax.
Their ambition — and who knows, they may yet emerge vindicated, with the genuine “super-bank” they crave — came at a price. Gordon Brown waived competition rules to allow the union to proceed, but the Prime Minister does not call the shots in this country any more. Neelie Kroes, the EU competition commissioner, saw things differently and has ordered the divestment of some retail operations.
Suddenly, Lloyds Banking Group, as it now terms itself, is looking less super.
Yes, Brown and Alistair Darling should have seen Kroes's intervention coming. So too should the Lloyds management. But to be fair, the latter has been taken back by Kroes's determination.
They're not alone. Stephen Hester of RBS has also endured tough negotiations with the commissioner. The result in his case is worse: RBS has to sell far more, the consequence of playing fast and loose in the boom years.
So Lloyds and RBS are to get more public aid against a background of economic uncertainty and with an EU handicap placed on them. Having embarked on the bail-out, the Government has no choice.
It's to be hoped this is the end. Whether it is or not only time, gulp, will tell.
