Britain's banks will be at the centre of the news spotlight this week as Barclays gives details on plans to raise more money and Royal Bank of Scotland sheds light on the search for its new chief executive, according to Chief Investment Officer Haig Bathgate.
Since the financial crisis, British banks have faced conflicting demands from politicians and policy makers – one the one hand they're being asked to maintain lending in order to keep the economy afloat, while at the same time regulators are demanding they hold onto more money as capital reserves. Barclays, which needs to plug a regulatory shortfall that some analysts suggest could be as large as £7 billion, is expected to give details on how it plans to raise money tomorrow. With stock markets buoyant – its own shares have doubled over the past year – appetite for investing in the bank could be considerable. Barclays may offer to sell hybrid bonds, which could prove attractive to investors looking for an income in the present low yielding environment.
RBS, which announces earnings this week, has been searching for a new leader since Stephen Hester stepped down earlier this year. The job is a poisoned chalice. With 80% of RBS shares owned by the state, the new CEO faces intense media scrutiny as well as the intervention of politicians – Hester himself had a strained relationship with the government. While some external candidates have ruled themselves out, Ross McEwan is emerging as a favourite among internal candidates because of his experience in retail banking.
Also this week, investors, consumers and mortgage holders should have a clearer idea of the prospects for interest rates after the Bank of England holds its monthly meeting on Thursday. New Governor Mark Carney is tipped to introduce a policy of forward guidance, which effectively means indicating that interest rates will stay lower for longer. This helps boost the economy and spending by letting both companies and individuals know that they can borrow without fear of interest rates rising.
Haig, who was speaking BBC Radio's Good Morning Scotland, also commented on the $35 billion merger of advertising giants Publicis and Omnicom. Given that the combined company will maintain two headquarters, two listings and two CEOs, the transaction is probably driven by scale rather than cost cuts. You can read a transcript of the interview here.
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