Myners set to examine bank profitability
CITY minister Lord Myners will delve deeper into how investment banks are generating a crop of bumper profits next month, after highlighting concerns that they may have been generated unfairly as a result of taxpayer bailouts or taking advantage of market chatter.
Myners will stop short of launching a full-scale official investigation but will return to the issue of examining sources of investment banking profitability in a speech in early December, a Treasury spokesman confirmed yesterday.
The news comes after Myners last week told the House of Lords that the scale of recent profit hauls at the banks “defies rational analysis” unless they have some kind of competitive advantage.
He believes this advantage could have come in the form of a boost from the injection of public money into the sector over the course of the crisis, or alternatively as a direct result of so-called “market colour”, the exchange of gossip between traders to aid investment decisions.
Dominant players in the banking sector have stunned investors so far this year by posting soaring profits, distancing themselves from harder-hit rivals.
Wall Street giant Goldman Sachs said last month that third-quarter profit climbed to $3.19bn (£1.93bn), putting it on track to dole out record bonuses early next year.
HSBC chief Michael Geoghegan said earlier in November that the bank’s global banking and markets division had “maintained its record performance for the year to date” over the third quarter.
And Barclays Capital, the star-performing investment banking arm of Barclays, booked a £2.7bn pre-tax profit for the first nine months of the year, excluding a £1.3bn charge on its own credit, boosted by the acquisition of the US business of failed bank Lehman Brothers last year.