06 Mar, 2008
Douglas Bence | 12:26:51 | 06 March 2008
the banks survived the reporting season with those predicting
dividend cuts proved wrong, a later consequence of the sub-prime
saga is only just beginning: credit rationing.
'Bank funding is becoming increasingly short-term,' broker
UBS says in a note.
'Funding markets remain distressed and the banks are therefore
funding short, under one year, introducing an uncomfortable
mismatch on 25-year lending as well as increasing the effect if
those short-dated markets close.'
However, term funding will not be unavailable indefinitely and
asset spreads are widening quickly'. UBS as a result remains a
seller of Lloyds TSB which is its least favour stock in the sector.
'Profit before tax fell in 2007, deposit growth was below
average, and its retail loan-deposit ration is highest of the
clearers, but its two times the price of net asset value is double
that of its peers,' wrote analyst Stephen Andrews.
It is, however, a buyer of Barclays, and a short-term buyer of
HBOS which has fallen 20% since it published its 2007 results. UBS
believes the concerns over HBOS' treasury asset quality have
been overblown. The worst Alt-A loans should see cumulative losses
of no more than 14%, it says. 'IBOS only starts to lose when
losses rise above 30%,' added Andrews who remains neutral on
the stock on a 12-month view, but sees scope for a short-term
bounce in the share price.