SURPRISINGLY cheerful news from the banking sector this week.
Part-nationalised Lloyds Banking Group saw its shares buoyed by forecasts that it is on the cusp of returning to profit.
It means there is a good chance that the government could recover a healthy profit from its stake in Lloyds and probably RBS, too – and much more quickly than originally envisaged.
Indeed, should things go well, the sale of the stakes in the banks could yet make a big dent in the national debt. The thing is, it may yet be David Cameron and not Gordon Brown that reaps the reward.
Better still is that the return to profit at Lloyds is being spurred along by a faster than expected improvement in bad debt write-offs at the bank. This is a clear sign that many businesses have weathered the recession in better shape than previously anticipated.
That’s particularly encouraging as it means the banks will be able to rebuild their balance sheets and return to the more liberal lending practices necessary to inject badly- needed investment capital into the economy. It might also help improve the interest rates paid to savers, which are currently abysmally low. The 2% differential between savings and loan rates is, by recent standards, a huge gap and is the principal mechanism by which our banks are strengthening their balance sheets. It does, however, mean that, at the moment, the nation’s savers are effectively subsidising the banking sector’s recovery.
The sense of optimism was further reinforced yesterday when Bank of Ireland announced that its 3bn euro rights issue was three times oversubscribed, a sign that the investment fund managers are now ready to return to the sector in force.
It’s particularly encouraging because Ireland’s woes make the troubles on this side of the Irish Sea look like a Sunday afternoon picnic.
Ireland was almost as bad a case as Greece, with its economy suffering huge GDP declines while its banks were massively exposed to the property sector downturn.
AS IF cheerful news from the banking sector was not enough, there are also some promising noises emerging from Liverpool’s city centre’s property market.
Many may have felt nostalgic about the demise of Lewis’s, but Merepark’s plans will make better use of the building than Lewis’s has done for many a year. Several floors have remained economically idle as the store has retrenched.
It’s a big investment that has been brought back onto the front burner now that the credit crunch and recession appear to have passed. To get together £37m in upfront cash is no mean achievement.
It would be even more cheerful, not to mention surprising, should the promoters of another scheme just a couple of hundred yards from Lewis’s also succeed.
Like Lewis’s, it involves a hotel signing up to anchor a £40m development on Oldham Street, near the junction of Renshaw Street and Hardman Street. Given Rapid Hardware’s recent move to Church Street, it’s an injection that is badly needed.
Between them, the Merepark and Oldham Street schemes amount to at least a couple of swallows and seem to suggest that an economic summer can’t be all that far away.
I do wonder, though, where the hotels will get their clientele from. They are some distance from the BT Convention Centre. Still, they should prove useful competition to the Adelphi.
