MD writes:


Banks world-wide appear to be growing profits strongly, as reflected by their positive share price movements. The only problem with this is that many are not really growing the top line; and the positive news is due to the release of provisions. All well and good - but how many of those provisions cover companies that are really basket cases just hanging on until the next downturn? Still, this could be too gloomy a prognosis and we may be in for a round of consolidation although probably not cross border. Except possibly for Europeans buying in the US; and the possibility of more UK banks becoming vulnerable if Banco Santander are successful with their Abbey bid.


So Banco Santander are trying to speed up their takeover. Could it be that they find the glare of publicity in the UK market somewhat uncomfortable and hope that revelations about corporate excess, nepotism and the like will die down once that takeover is completed? Pissing into the wind on that count so don't bet on the proposed London listing lasting any longer than it has to. If UK fund managers dump the stock ‘cos they don’t want exposure to Spain (read can'’t be bothered to find out) then the listing will swiftly wither.

Corporate Excess:

It seemed that the Banco Santander method of not giving a sacked exec a pension after a stupendous payoff might be one approach to adopt in the UK. Ah, except for the discovery that some of their ex execs are still entitled to pensions even after the said payoff. And these at the same level for surviving spouses. Nice work chaps. Also amused (editor: surely you mean envious?) to read of the payoffs for the Banco Hispano execs when the bank merged to create the current Banco Santander. £100m gives a new meaning to "stupendous"!


Have to say whilst it would be disappointed to see Abbey go abroad, a bid by HBOS (from an investor's perspective) may not be the answer: they (not to mention the other UK banks) will be tempted to overpay. For the consumer nothing will be improved by a UK combination - service for certain won'’t improve. For the workers there will be job cuts and "offshoring" undoubtedly to India. So not much benefit there for UK plc. Except, of course, for our chums running M&A in the “investment” banks.


Prices continue to rise, but with news of China possibly stockpiling oil (well, they have to do something with all the dollars their exports earn) it wouldn’t be surprising to find that copper too is being stockpiled. Be prepared for sharp falls in the price in early '05.


Is it time for the £/$ rate to turn? The pound has – to some eyes at least – been overvalued vs. the greenback (not to mention vs. the Euro) for sometime. Unfortunately, the UK has similar structural issues to the US economy (see our feel-good articles on these here and here) so it’s relative strength is puzzling. But it maybe that the prevailing rate reflects the view that US is so very much worse than in the UK. Just a thought, keep your eyes peeled.

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