It’s payback time as banks make profits

ALAN CLEARY, MANAGING DIRECTOR, PRECISE MORTGAGES
ALAN CLEARY, MANAGING DIRECTOR, PRECISE MORTGAGES

It’s a bumper season for banks once more, with several reporting not only that they are back in the black but that things are looking rosy.

No doubt politicians will start the whole bonus saga again and go on about how reckless bankers should be punished for their sins but I am pleased to hear they are doing well again.

Given that banks led us into the recession they should be the first to emerge from the rubble.

Most, although not all, have benefited from lower bad debt provisions as the performance of their mortgage portfolios has started to improve.

HSBC’s US business was one of the first to report substantial write-downs when the sub-prime crisis began, and at last it is showing some signs of recovery.

In fact, the whole problem started in the US and it will only truly end when the US housing market recovers, so HSBC’s US results are significant.

I can imagine a scenario whereby if banks keep reporting lower bad debt provisions investors will regain some confidence in the retail mortgage-backed securities market.

As I’ve said many times, the mortgage market needs new money before it can see meaningful growth or even stability, and it’s possible that a run of positive news from lenders could be just be the catalyst we need.

So let’s keep our fingers crossed that bankers repay their debt to us all by making good profits and channelling these into lending.