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The "Old Lady" shows UK banks the real meaning of the word profit
Bank of England profits soared to nearly £1bn last year on the back of operations supporting the financial sector.
Pre-tax profits quintupled to a record £995m in the year ended February, the most since the Bank began revealing its earnings in 1971.
This allowed the bank to pay out a dividend to the Treasury of £417m, up from more than five times from the previous year, according to the bank's annual report.
The scale of the BOE profits has raised a few eyebrows however, with some analysts of the opinion that the Bank has been charging troubled lenders "distress rates".
Meanwhile the organisation formed by the UK treasury to handle their interest in the semi-nationalised banks under their control have begun to sound out investors about the possibility in selling off some of their share holdings as stock market revival appears to be increasing confidence in the financial sector.
The body, UK Financial Investments, manage the 43.5 per cent stake in Lloyds Banking Group as well as the 70 per cent stake in Royal Bank of Scotland, hope to have completed some sell offs within the next twelve months.
Shares in both banks rose strongly on Tuesday after news of this possible development began to filter through. Royal Bank of Scotland Group PLC (RBS) and Lloyds Banking Group (LYG) rose strongly Tuesday following a report that the government is sounding out investors with a view to selling its interests in the banks - even though that sale could take up to several years.
RBS was up 5.8% at 44 pence while Lloyds was up 4.8% at 103 pence, both outperforming the FTSE100 index which was up 0.9%.
The report also said it could take five or six years for the U.K. government to exit the two banks. HSBC Holdings PLC (HSBA.LN) was up 3.5% at 575 pence while Barclays PLC (BCS) was up 2.4% at 288 pence.
A UK car scrappage scheme championed by Gordon Brown, Britain’s prime minister, got off to a stuttering start on Monday as confusion about how it would work prompted several leading manufacturers to delay their involvement.
Glitches over tax and other administrative issues marred the launch of the scheme while Honda, Ford and GM were reported to be waiting to clear up some important details on how the trade-in scheme will operate , with the first scraps of information only being received from the Department for Business and Regulatory Reform before the weekend.
As expected, Marks & Spencer confirmed yesterday that the dividend due to be paid to shareholders will fall by a third after annual results revealed a near 40% drop in profits. (£604.4million compared to £1billion in 2007) This is the first time that M&S has been forced t cut their dividend since 2000, causing considerable consternation among their shareholders.
Doing better is Scottish & Southern Energy (SSE), who is expected to announce "modest" increase in profits, when producing their annual results on Thursday. Analysts predict that SSE will post underlying profits of about £1.25 billion for the year to the end of March, up only £200,000 from 2007, but still showing an increase. To retain their market share, the energy group has been forced to cut both electricity and gas tariffs during 2008, although both by much less than had been feared.
The benchmark FTSE 100 Index continued to impress, rising 36 points to 4,482.45, while the FTSE 250 index also rose by 121.69 points to close on7698.32
Sterling rose slightly against the dollar and the Euro and rose slightly against the Japanese Yen and the Swiss Franc:
- Pound/Japanese Yen 149.02
Wall Street had a reasonable day on trading The Dow Jones Average dropped a mere 6.7points to close at 8497.39, while the NASDAQ rose 7.36 points to 1739.72.
The US Senate have voted overwhelmingly in favour of a bill that will impose new restrictions on the credit card industry. Designed to set a curb on sudden interest rate increases and hidden fees The bill marks the first major financial reform made by the Obama administration.
Spokesmen for the credit industry have warned that the measure could lead banks to issue fewer credit cards thus making it more difficult for consumers to get credit.
Hewlett-Packard (HP) reported a 17% fall in quarterly profit, attributed to reduced businesses and consumers spending on computers, printers and ancillary products. .
The world's top PC marker said that net profit totalled £1.1billion in the three months ended 30 April, whilst warning that profits and revenue were likely to continue to fall during 2009 HP made the expected announcement that they are about to cut around 2% of its global workforce, making for a job loss of more than six thousand people.
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