Ratings agency plays down upbeat bank results

Despite positive interim results from all major UK banks, Standard & Poor’s says that a sustained im-provement in their performance is far from certain.

In a recent report the ratings agency says several banks remain overly reliant on wholesale funding that is government guaranteed or central bank funded. It adds that the banks also face significant refinan-cing requirements over the next couple of years.

The report says: “We expect eco-nomic and market developments that are largely beyond the control of banks’ management teams to continue to disproportionately in-fluence bank ratings through the remainder of 2010.”

It expects muted credit demand, zero to negative loan growth and fierce competition for customer deposits.

The report adds: “We believe that bank ratings may become more stable if the economic recovery does not stutter and funding mar-kets demonstrate a more consistent degree of normality.”