Manageable Impact From Debt Unrealised Losses for Large UK Banks; Robust Funding and Liquidity Positions
DBRS Morningstar released a commentary on the potential impact of unrealised losses for large UK banks.Key highlights include:
• UK banks have securities portfolios at amortised cost that represent a lower proportion of assets than for European Banks and SVB.
• Under an extreme theoretical scenario that the large UK banks are required to sell their amortised cost bond portfolios, we view the negative impact on the banks’ CET1 would be modest and fully manageable, even when we assume a 10% haircut to the value of the amortised cost portfolio.
• We consider UK Banks to have strong funding and liquidity positions, largely underpinned by their solid customer deposits base and solid access to the capital markets for funding.
“The potential impact of realising the unrealised losses from their securities portfolios at amortised portfolios is very manageable for UK banks, particularly considering the banks’ strong internal capital generation, which is benefitting from the asset repricing at higher interest rates,” notes Maria Rivas, Senior Vice President, Global Financial Institutions at DBRS Morningstar.
Barclays is a holding company. Through its subsidiaries, Co. is a financial services provider engaged in retail banking, credit cards, wholesale banking, investment banking, wealth management and investment management services. Co.'s business segments are: Barclays U.K, which provides everyday products and services to retail customers and small to medium sized enterprises; Barclays International, which delivers products and services designed for Co.'s corporate, wholesale and international banking clients; and Head Office, which comprises head office and central support functions (including treasury) and businesses in transition.
HSBC Holdings is a financial services holding company. Through its subsidiaries, Co. operates four businesses: Retail Banking and Wealth Management, which serves customers through four businesses: Retail Banking, Wealth Management, Asset Management, and Insurance; Commercial Banking, which provides working capital, term loans, payment services, and international trade facilitation; Global Banking and Markets, which delivers a range of transaction banking, financing, advisory, capital markets, and risk management services; and Global Private Banking, which provides a range of private banking services. At Dec 31 2017, Co. had total assets of US$2.52 trillion and deposits of US$69.92 trillion.
Lloyds Banking Group is a financial services provider. Co.'s main business activities are retail and commercial banking, general insurance and long-term savings. Co.'s Lending products are mortgages, credit cards, personal and business loans; Deposit products include taking Current accounts and savings accounts; Insurance products are home insurance, motor insurance and protection; Commercial financing products includes term lending, debt capital markets and private equity; and Risk management products includes interest rate hedging, currency and liquidity. As of Dec 31 2017, Co. had total assets of £812.1 million and total deposits of £448.0 million.
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