Blue Chip: The banks don't look so bonny

AS THE bank reporting season passes away for another six months, it is useful to reflect on some of the lessons, for a sector that has fuelled much of the recent bull market. Barclays has produced a poor set of figures. There were massive exceptional losses, and pre-tax profit for the year to December fell 26 per cent to pounds 1.7bn. Exceptional losses of pounds 668m from the sale of its investment banking arm was the chief problem. NatWest pre-tax profit dropped 10 per cent to pounds 1bn, chiefly as a result again of problems at its investment banking arm NatWest Markets where losses hit pounds 706m, as a result of trading losses. In the US, its private banking arm, Coutts, had a dreadful time, and is pulling out. Gartmore, the fund manager, lost several high profile clients. And so it goes on.

At HSBC, the talk was of higher provisioning. It set aside provisions of pounds 615m, more than double 1996's allocation.

And if that were not enough, Abbey National, one of the stars of the retail sector, raised concern when it talked of pressure on its core business of mortgages.

It looks dangerously as if the bull market in financial stocks has reached the end of the line. It will be difficult to argue that the sector can recover the loss of sentiment in a matter of a few months; if anything, it is likely to worsen. Finally, the talk of merger - between Barclays and NatWest, more recently between Barclays and Standard Chartered, look over-egged. UK competition authorities would almost certainly can a Barclays- NatWest tie-in, while ironically, Standard Chartered, which produced glittering figures, looks set to enjoy its independence for a little while longer.