THE shuffling of money by high street banks desperate to cling on to some degree of respectability is descending into a squall of accountancy-speak that does nothing to restore faith in the financial system.
The Royal insists that its missing billions are write-downs and not write-offs. HBOS says they are not write-downs but fair value adjustments.
This week, when Lloyds TSB is expected to say it has no need to raise capital, we can expect some squab
bling over the difference between the trading book and the banking book and accusations of sleight of hand to conceal the real writedown/FVA/impairment/call-it-what-you-will number. What it means is that highly paid bean counters got their sums wrong and the poor old punter – customer and private shareholder – has been forced to pick up the tab.
While there has been much hand-wringing, "contrition" and "lessons learned", the top brass have been damaged by the sub-prime fall-out and are faced with even more public scepticism about the way they do business. Yet – as one HBOS shareholder pointed out – they are still adding a lot of zeroes onto their salaries.
Two weeks ago RBS boss Sir Fred Goodwin was forced to swap his regulation white shirt for a hair shirt but escaped the crossfire at the AGM to fight another day. Last week we had HBOS chief executive Andy Hornby beamed in by video link from London to a disgruntled shareholder gathering in Glasgow who felt he should have been present in person. Mischievous rumours that his sat-nav could not locate Scotland were quickly dismissed when it was announced that he had to be in the City to brief institutional shareholders on the £4bn rights issue.
Hornby, who appears to be programmed to say "prudent" every other sentence, at least answered a few questions from the floor, even if it did seem he was referring to another organisation rather than the one which only last year was buying shares from investors for nearly 800p and was now selling them back for 275p. Call that prudence?
Hornby told me in a phone call on Friday (his sixth word was prudent) that he could not guarantee further fair value adjustments, though the value of the assets could be restored if conditions improved. While attention has turned from sub-prime mortgages to the slump in commercial property, he unequivocally dismissed any suggestion that it was a new concern for the banks, even though it represents a huge chunk of their lending strategies.
He stressed that there were no credit impairments and that the debt is Triple A rated by the credit agencies, without mentioning that the validity of those ratings was questioned during the height of the crisis.
To give credit – sorry for the pun – where it is due, Hornby cancelled the buyback programme and the dividend hike was announced last year. But it could have been canned and there is still no admission of mistakes or U-turns, or that anyone was misled over the bank's finances. According to Hornby, the balance sheet is already strong. So that's why it needs another £4bn. Follow? Thought not.
Lord Stevenson, the HBOS chairman, made a passionate plea to catch those responsible for the bear raid on the shares in March. But some bank followers said the appeal for capital and the subsequent slump in the shares could make it more difficult for the Financial Services Authority to prove that the rumours about HBOS's financial difficulties were wholly mischievous.
Hornby must count himself fortunate that following demands for Goodwin to resign there were no such calls for his own head. Some say that is because the capital ratio is in better shape and that Hornby is more personable in the eyes of the City.
No such problem at Lloyds, where Eric Daniels, the chief executive, is in the good books for having swept aside its troubled recent past. It's been a painful couple of years bringing Lloyds back on track, but it is now returning to something like its old boring self as a traditional safe house. It may yet come unstuck if the UK economy goes into recession, though this week it is likely to trumpet its low exposure to US credit markets which will keep the level of writedowns to a manageable figure.
But all told, this has been the worst of times for the banks and there is more still to come. Barclays will probably be hit for £3bn and, despite denials, that could mean another rights issue and yet more excuses and apologies. And, of course, more zeroes to those already bulging pay packets.
The full article contains 792 words and appears in Scotland On Sunday newspaper.
