Humphrey Percy Chairman and FounderWed 11 Oct 2023
UK Branch Banking
This week has revealed the difference in bricks and mortar strategies between the traditional clearing banks and first an ex building society now a bank and then a challenger bank. The clearing banks have been efficient and some would say ruthless in shutting branches. There are now 4,000 branches in the UK after the closure of 5,300 in the past 8 years. That means that Nationwide has the largest network of any banking group with 605 branches. Metro is also committed to the branch strategy with 76 branches but differs from 16 million customer Nationwide with 2.8 million. No doubt the GBP 650 million funding largely from their new 53% Colombian shareholder together with the write down by 40% of the GBP248 million bonds has helped, but the sense is that Metro at best has bought itself some time. To do what is somewhat unclear.
US Interest Rates
Early this year the banking darling of the US tech classes, Silicon Valley Bank was caught by rising interest rates-and that was well before they reached today’s 5% levels. Well that is an example of a smaller bank getting it wrong and having insufficient liquidity the banking sages huffed. At that time the Bank of America CEO at the other end of the scale promised huge returns for BoA shareholders when rates went up as they were sitting on a mountain of low cost deposits. As it turns out BoA did precisely what SVB did and bought yields of 2.4% which does not look that clever for CEO Brian Moynihan. the difference is the scale of BoA that allows them to weather that particularly bad Treasury decision. However the unspoken fear is that if the very biggest banks could get it so wrong, is there not a story about to break about the smaller members of the US banking fraternity? 3 months Us Interest rates 5.51%. (Ouch)
On 7th October 1916, Corporal Adolf Hitler was wounded in the thigh during the Battle of the Somme during the Great War. A few centimetres higher and who knows what might not have happened or happened differently with the Nazi Party and its subsequent immolation in WW2. In the same way one of our readers commented on the piece that we did on oil last Friday which seemed OK until…the tragic events over the weekend in Israel and Gaza that sent oil to where it is now with ICE Brent up at USD87.65.
International Monetary Fund
Having if not lavished praise but certainly praised the UK a few short months ago for its economic performance in an admittedly lacklustre field, yesterday the IMF marked down the UK’s prospects to the bottom of the G7 class behind Italy and at less than half USA and Canada with 0.6% growth for 2024. And just for good measure they predicted high interest for the UK for 5 years.
I say a Little Prayer
It was of course Dionne Warwick who made this Hal David and Burt Bacharach song great this day in 1968 when it went Gold:
The moment I wake up Before I put on my makeup I say a little prayer for you While combing my hair, now And wondering what dress to wear, now I say a little prayer for you
Forever, forever, you’ll stay in my heart And I will love you Forever, and ever we never will part Oh, how I’ll love you Together, together, that’s how it must be To live without you Would only be heartbreak for me
I run for the bus, dear While riding I think of us, dear I say a little prayer for you At work I just take time And all through my coffee break-time I say a little prayer for you
Forever, forever, you’ll stay in my heart And I will love you Forever, and ever we never will part Oh, how I’ll love you Together, together, that’s how it must be To live without you Would only mean heartbreak for me
Discussion and Analysis by Humphrey Percy, Chairman and Founder
British Pound There really was something for everyone in Bank of England Governor Bailey’s comments yesterday. Firstly he said that the BoE was comfortable with the market’s view of the decline in UK interest rates -meaning one presumes both on extent and timing. Then he followed it up by saying that the UK labour market […]
EU Commission Instead of November’s EU growth forecast of 1.2%, the EU Commission has revised back its prediction to 0.8% for the growth in the gross domestic product of the 20 countries. The 2025 year however will see growth of 1.5%. Back to 2024, it is difficult for the EU bloc to grow much when […]
Germany With the German IFO or Business Climate Index down from 90.10 a year ago to its current level of 85.20, Germany’s business leaders are more realistic about the outlook for Europe’s largest economy than their political leaders. Chancellor Scholz wisely passed the speech making duties yesterday to one of his cohorts who managed with […]