According to SNL Data, Barclays, HSBC Holdings Plc, Lloyds Banking Group and Royal Bank of Scotland may double the collective £720m set aside to deal with mis-sold derivatives claims. However, the new costs could reach a further £2bn.
The four banks will review 40,000 interest rate swap transactions made since 2001, and if it they are found to have been mis-sold, or the bank has incomplete records, the bank may have to pay out.
The news comes as fund managers were slowly beginning to increase their exposure to the banks to increase their long-term returns, while some investment managers have reported improving investor sentiment towards the outlook for the global economy.
Managers of funds including Henderson UK Alpha Fund and Martin Currie North America Fund have recently invested in banking stocks.
“We will have to wait and see how it develops as to whether or not this latest scandal impacts bank share prices.” Commented Nic Clark, banks analyst at Charles Stanley. “Obviously the banks are dealing with the ongoing scandal of the mis-sold PPI claims, which is ballooning, and it’s unclear as to what the final bill for this will be.”
“RBS are releasing a new figure for funds that are to be set aside, and it’s a case of wait and see for the others at the moment.”
Net losses in 2012
Both Barclays and HSBC are expected to report a fall in net income in 2012 compared to the previous year. The former, also facing penalities of £290mn for manipulating benchmark interest rates, estimates a fall to €4.41bn from €4.55bn in 2011.
HSBC meanwhile estimates its net income to be €12.11bn, down from €12.90bn. It has agreed to pay $1.92bn to US authorities to settle an investigation that found a lax compliance culture at the bank, making it vulnerable to money laundering and transactions in breach of national sanction laws.
Meanwhile, Lloyds and RBS anticipate losses of €891.7m and €3.98bn respectively. RBS’ losses have increased since last year, and the bank may have to pay £500m to settle allegations that it was manipulating Libor.
Finally, Standard Chartered looks set to be the only U.K. bank to report an increase in net income in 2012, at €3.86 billion. This is despite the fact the bank reached a $340 million settlement with the New York State Department of Financial Services over money laundering charges.
