Friday Rant

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Friday Rant

Post by Doc on Fri Jul 27, 2012 10:57 pm

I enjoy blowing off steam on Fridays, because something in the news will get up my nose. This week it's got be British Gas who posted massive profits. On top of that Barclays bank also post huge 1st quarter profits, and it was all done in the gambling casino markets with savers money.

So when UKPLC is struggling to keep profits flat, why is it that utility companies and banks can feel good about themselves when shafting Joe Public.

The bank of England have pumped billions into the economy recently, but it goes straight to the banks and bond markets. The chancellor tells the banks to start lending to industry to get the economy moving again, yet the banks just give him the finger. As we own Lloyds TSB, why can't we just run it as we would like. Why not offer savers better interest rates and gurantee loans to businesses to expand. The other banks would lose customers by the millions all wanting to invest in the government run bank. Thats the only way to teach the bankers a lesson and force them into doing banking how it should be done again. Its our bank Osbourne, so use it against the banks who are hurting your policies. Simples
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Re: Friday Rant

Post by LadyPutt on Fri Jul 27, 2012 11:03 pm

Hear, Hear!!
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Re: Friday Rant

Post by raycastleunited on Fri Jul 27, 2012 11:23 pm

"it was all done in the gambling casino markets with savers money."


Oh dear. Do you read the Mail or the Express? Sorry but you really don't know what you're talking about.

Savers' money represents a tiny amount of the cash that a bank like Barclays "plays with". Actually, the personal banking business that deals with you and me isn't very profitable.
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Re: Friday Rant

Post by Doc on Sat Jul 28, 2012 2:21 am

raycastleunited wrote:"it was all done in the gambling casino markets with savers money."


Oh dear. Do you read the Mail or the Express? Sorry but you really don't know what you're talking about.

Savers' money represents a tiny amount of the cash that a bank like Barclays "plays with". Actually, the personal banking business that deals with you and me isn't very profitable.

Ray the profits from normal banking rose by 15% too
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Re: Friday Rant

Post by Mary_S on Mon Jul 30, 2012 4:42 am

We need a "Bank of Dave" Smile
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Re: Friday Rant

Post by Doc on Wed Aug 01, 2012 7:26 pm

Ray you are obviously more in the know about financial institutions than me, but would still like to know why a government owned bank like Lloyds, shouldn't run the bank like the government would like to see the whole sector run it. Lending more to business etc is what they're trying to encourage, but the banks just do whatever they want.

Thats one point, but the other is the amount of criminal activity that the banks have been doing since the crash in 08. Libor is just the tip of the iceberg, but HSBC now in trouble for money laundering as well as PPI issues that all the rest have been doing. Huge financial institutions allowing rogue traders to lose billions ....

Heres a bit of cut and paste about the oil industry who are also seen as bandits.

"With no seeming end to these financial scandals, is it any surprise that the pricing mechanisms used in the oil industry are now coming under scrutiny? The press, politicians, trading associations and even parts of the trade itself have all lined up to claim that the oil price can be / is being rigged in the same way as Libor and that something should be done about it.

To compare the banking and oil industries, let’s first go back to 2008 when the financial crisis hit and the oil price collapsed. From 2004 onwards, prices had risen to an unprecedented high of $150 per barrel. But then, in the space of 4 short months (July 2008 - October 2008), the value of oil went down to $35, thus wiping out all of the rises that had been experienced over the previous 4 years. Virtually overnight, profits of the Oil Co’s were decimated, billions and billions of $ were owed in derivative contracts and ruinously empty oil tankers were “anchored-up” for months on end, whilst the charter fees racked-up.

Of course, the well-documented Government bail-outs for the likes of Shell, Exxon and BP have been explored before….erm - wait a minute, there were no bail-outs for the oil industry! In fact, the industry just quietly went about its business as usual. There were no major bankruptcies, nor major payment defaults. Swap and Derivative arrangements were all fulfilled and most importantly of all, the oil kept flowing – all this against a backdrop of butchered credit lines and complete financial meltdown. The oil majors and minors simply cut their cloth accordingly and in an incredible move, even cut the bonuses of their top brass to reflect the lower returns being generated".

So why can't government make the banks do what is required in the interests of the country, to protect us from the Euro crisis etc.
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Re: Friday Rant

Post by raycastleunited on Wed Aug 01, 2012 9:08 pm

It's pretty simple really, although the solutions are very difficult. The corporate culture of the banks has led them to have a very short term approach.

If you can make big money in a short space of time on a one off transaction, you get rewarded far more than if you make a small sustainable profit from a client, even if that business continues to be a client for 50 years. The sector is extremely competitive, and due to the size of the rewards, inevitably the temptation is too great for some people who decide to take short cuts and and up in jail. For most banks, it's worth the risk of the odd rogue trader costing you because in the most part you'll do ok. When I was a teenager, a mate of mine decided to save money by not buying train tickets. He jumped on the tube every day to get to college, with £10 in his pocket to pay the inspector the on the spot fine. Sure he got fined a few times, but over the course of the year he saved loads of money compared to everybody else who bought season tickets. That's the calculated risk taking that the banks love.

So you can blame the top brass in the boards for encouraging this approach with their pay structure and incentives, but really the Board is just trying to keep shareholders happy.

Shareholders aren't happy with the low level of profits earnt by lending to small businesses. They expect dividends and significant capital growth, so lead the banks to adopt the short term approach. The government wants Lloyds to be profitable too, so they can recoup their investment and then justify all the billions they poured into the sinking ship. They are no different to other shareholders, in fact the government probably has an even shorter term view than most... pension funds are looking for long term growth but the Government is politically motivated and wants a return in time for the next election.

The problem is that, not only is lending to small businesses less profitable, it is also more risky. A small start up venture like a new restaurant is far more likely to go bust than Shell or BP, so as a bank who would you lend to? Since the collapse of Lehman, banks are far more reluctant to lend to risky counterparties. The sub-prime mortgage shock showed that banks were prepared to lend to anyone, they just charged a higher rate to lend to more risky borrowers. Now things have changed, and banks prefer to lend to big businesses they can trust, all be it at a lower return. Big corporates like Diageo are now borrowing at record low prices because they are so safe, but to make up for it the banks need to carry out more risky trades in order to boost their profits to expected levels.
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Re: Friday Rant

Post by Doc on Wed Aug 01, 2012 9:56 pm

Ray I get that mate and can see why they work that way. But from someone on the outside who has allowed the government to bail out Lloyds, and then see that this bank that we own, won't work to government instructions (And Bank Of England) then just maybe theres a way the government can see a bigger return on its investment in Lloyds, by nationalising it. By going down this route, the government would have the power to have the bank operating how it wants. It could also offer Joe Public a better offer and entice everyone else who's got a bank account to jump ship. It wouldn't be long before the rest of the banks reacted in a way that kept their customer base intact, with the outcome of a better banking sector. Offer savers better rates, make it easier to get business funds ...... Lloyds would very quickly be the bank of choice and employing more staff to keep up with the growth. The value of the bank would grow and we would see a better return when the business is finally sold.

Co-op and Virgin are encroaching into the sector along with the supermarkets, but none of them are offering a point of difference. Co-op maybe more ethical, but still use low savings rates etc, and Virgin just see a way of making more cash, whilst telling us that they are customer focused. Sorry they are just another bank offering exactly the same as the rest, and indeed doing the same as the rest.

Very simplistic view I agree, but it makes sense to me
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Re: Friday Rant

Post by Doc on Fri Aug 03, 2012 8:04 pm

Well This week my rant is staill aimed at the banking sector,after seeing the latest RBS results. Hester the guy who works for us as we own 82% of the bank, seems quite pleased with the performance, but even after sacking plenty of traders who were involved in the Libor scandal, he can't know how much the coming fines will be. We all gave Bob Diamond a kicking over this scandal, so why shouldn't Hester take some flak too. Why is it just the traders who got sacked, why not management who should have been checking what these twats were doing. He's also responsible for the banks IT that badly failed its customers and expects to pay £125m in compensation, then theres another £50m expected pay out for PPI miss selling and on top of that even more millions in pay out to small businesses who were miss sold insurance. I did however like his closing comments, which if true will be good for us all:

Mr Hester also told the BBC that the banking industry, "became a bit detached from society and it is coming down to earth with a bump".

He said it needed to change its culture to put customers first.
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Re: Friday Rant

Post by oldparwin on Mon Aug 06, 2012 11:54 pm

To me this is just another George Osborne cock up, as chancellor, he is a massive joke, don't think he lives in the real world, sooner he is gone the better Britain will be.
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