Banking Guide Blog

Massive profit boost at Barclays

Fri, 12 Mar 2010 14:14:50 UTC

Barclays’s profit for 2009 was £11.6 billion, an impressive 92% boost from the previous year. The rise was spearheaded by the bank’s credit card and investment departments, and bolstered by the sale of BGI (Barclays Global Investors) to the US firm Blackrock.

Company bosses, such as current president Bob Diamond, have also snubbed multi-million pound bonuses for the second year running in a bid to soothe public unrest and regain the trust of customers. However, bonuses of £2.7 billion have been earmarked for other employees, working out as approximately £191,000 per head.

The bank was one of the few banking institutions to escape the recession with little more than skinned knees, and has none of the crippling debts that mar the books of HBOS and the Royal Bank of Scotland.

Barclays's commercial division earned £749 million in 2009, closely followed by high street and retail banking with £612 million. Barclaycard was in third place, bringing in £761 million by the end of the year, whilst investment banking and the sale of BGI earned £2.46 billion and £6.33 billion respectively.

Experts believe that Barclays ‘bought off’ the recession with funds scurried away in rich sultanates in the Middle East. Since then, the bank has given out £35 billion in loans to British households and businesses, three times what it expected to lend by April 2010.

Many people have been vocal in their praise for Barclays, with a spokesperson for Hargreaves Lansdown stockbrokers saying that its year-end results "are proof that the bank has skilfully woven its way through the recessionary minefield,” calling the figures "extremely impressive”.

Credit Unions - An alternative approach to saving

Fri, 05 Mar 2010 13:58:26 UTC

Ever since the recession began, the public has been falling out of love with banks. Barclays' recent announcement of £11.2 billion profits has once again brought the various issues with the conduct and profitability of banks to the forefront of public conscience. But what can you do if you are tired of giving banks your money, tired of huge banking bonuses and ultimately wish to burn your bridges with the entire banking sector? Join a credit union.

What is a Credit Union?

Credit Unions are locally run organisations where customers can save and take loans. Because they are a co-operative organisation, anyone who chooses to put money into a savings account effectively owns part of the business. Therefore, unlike banks any profits made from loans' interest and joining fees is paid back to members in the form of dividends. Instead of using the money you save in investment banking, Credit Unions use it to offer low fixed interest loans to their savers who are in need. Since all the customers are members of your community this means that your money is being used to help improve the livelihood of people in poverty on a local level. Credit Unions are also regulated by the FSA (Financial Services Authority) and as such, the safety of your savings is guaranteed.

When a customer wishes to take out a loan there are no fees, nor is there a minimum loan amount and any issues which arise with payment can be discussed and a flexible solution which suits the customer can be found. There is also no penalty for early payment with interest calculated from the reducing balance of the loan.

The main downside to saving with a Credit Union is that you are unlikely to get high interest on your savings, although this does vary from each Credit Union to the next, with some now even offering ISAs (Individual Savings account). Another issue stems from the fact that each Credit Union is different and thus you can only withdraw money from your local one. This means it is still necessary to hold a current account with a bank or building society for your daily needs. In many cases one day's notice is required to withdraw any large amount, meaning you may not be able to get hold of your money exactly when you need it.

On the whole though, Credit Unions provide a refreshing, ethical and community led approach to savings and loans and with more and more people becoming increasingly disillusioned with banks, they could be a force to be reckoned with in years to come.

For more information on where to find your local Credit Union and which services it offers see:
here

Charities want 'Robin Hood tax' on banks

Fri, 26 Feb 2010 14:51:53 UTC

A group of 48 charities and trade unions has been formed to provide backing to the introduction of a new ‘Robin Hood’ tax on the banking system.

The tax, supported by Comic Relief, Save the Children and Oxfam amongst others, would consist of 50p on every £1,000 of trading by the big financial institutions. The 0.05% tax would be a tax on banking transactions rather than earnings, so it would not hurt the individual workers.

The money earned would go towards public services, schools and hospitals, as well as raising billions every year in the fight against global poverty.

The idea behind such a tax is by no means new, as it was previously mentioned as far back as the 1970s. But the global recession is now being seen as a new way to instigate the tax because of how the banks have behaved.

If the tax is adopted around the world, it could raise an estimated $400 billion a year. So far it has received a favourable reception in the UK, France and Germany, with the US also sounding positive.

However, not everyone is in favour of the tax. Mervyn King, the Governor of the Bank of England, has stated that he is against it because it could increase tax avoidance levels and force more banks into operating in tax havens.

You can vote on whether you think the tax should be introduced at the Robin Hood Tax website, where you will also find a 3-minute film starring Bill Nighy and written by Richard Curtis.

The group has adopted the slogan: “Turning a crisis for the banks into an opportunity for the world”.

Banks still not lending

Fri, 26 Feb 2010 14:51:26 UTC

The ramifications of the recession are going to go on for a long time in the banking sector, even if the recession has officially come to an end. Now RBS and Lloyds are being criticised once again, but this time it is not bankers’ bonuses that are causing concern, but their lack of lending.

Both banks have a combined legal target of £39 billion that they must lend by the end of February. But the Committee of Public Accounts has now issued a report claiming that both banks are unlikely to reach this target.

The commitment was made by the two banks in return for the government bailout using taxpayers’ funds. £850 billion was paid out to keep the banks going.

The lending of money to both businesses and homeowners is crucial for the health of the economy. Indeed, it is the reason for the reduced interest rates imposed by the Bank of England and the recent quantitative easing programme.

Following its bailout, RBS committed itself to providing £25 billion in lending for both business and mortgage customers, with Lloyds committing to £14 billion. RBS had to pay more because the government owns an 84% stake in the bank compared to just 43% for Lloyds.

The report is calling for new powers for the Treasury to help it enforce the lending commitments, otherwise they are essentially worthless. The chairman of the committee, Conservative MP Edward Leigh, said that the Treasury “does not seem to know why the banks are not lending,” and that it has “few sanctions available”. It now wants sanctions to be put in place that are enforceable in time for next year’s commitments.

The banks, however, are claiming that it is not their lack of commitment that is the problem, but it is instead the low demand for loans that is preventing them from sticking to their lending levels.

UK's top ten cities for fraud named

Fri, 19 Feb 2010 15:39:46 UTC

According to recent research carried out by card protection specialists, CPP, the Welsh capital is now Britain’s number one card fraud hotspot. Cardiff has stolen this dubious accolade from London, knocking it into second position. Numbers 3, 4 and 5 on the black list are Norwich, Southampton and Leeds. Other cities featuring in the Top 10 are Newcastle, Plymouth, Glasgow, Edinburgh and Nottingham.

37% of Cardiff’s residents have fallen victim to card fraud at least once in the last year and London is not far behind with a rate of 35%. Overall, card fraud in the UK was up by 8% last year with an extra 2.7 million victims over the last two years.

On average just over £590 is siphoned off each time a card is misused, although 16% of victims have over £1,000 stolen. The fraudster’s favourite spend is electronic goods (13% of cases), whilst clothing accounts for 10% and holidays 7% of card crimes.

You may well wonder how this can happen. It seems that online card fraud is the most common scenario with 32% of cases arising in this way. Another 17% of victims had their cards cloned at a cash point or when using a Chip and PIN device, whilst a worrying 34% do not know how it happened. In many instances the first indication of anything being awry was when the victim received a call from their bank (43%).

Tips to prevent card fraud include the following:

Take good care of your cards and don’t carry more cards than necessary
Do not let them out of your sight e.g. in a shop or restaurant, in case they are cloned
Never write down your PIN
Do not let anyone else use your card
Contact your bank as soon as you suspect a problem and make sure the bank has your contact details for emergencies

Bank calls end to quantitative easing

Fri, 12 Feb 2010 15:56:17 UTC

The Bank of England has just announced an end to the practice of quantitative easing, where excess cash is printed off and injected back into the economy. It has been surrounded by controversy since it began, but it was seen by many experts as the only way to stimulate the economy when it was failing to react to the lower interest rates.

The quantitative easing programme has seen £200 billion pumped into the economy since the start of the recession. Many economists predicted that the programme would end earlier, but it carried on throughout the recession until the bank announced that there is now enough money in the system. However, although it has officially come to an end, the bank has refused to rule out using it again in the near future if the economy continues to struggle.

The first line of defence, the reducing of interest rates, failed to have the desired effect of increasing lending again, even though the rates had been reduced to their lowest possible level. Indeed, the bank has now decided to keep interest rates at just 0.5% for the 11th month in a row.

Many analysts will now be asking the important question of whether it actually worked. It is true that bank lending is still very low, but it won’t really be clear just how successful or unsuccessful it has been for some time to come.

Although many financial institutions simply held onto the extra money rather than lending it out, most analysts agree that without the quantitative easing programme, the economy would be in a worse position now.