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Daily Digit: Banks face $100bn clean up

Thursday, October 31, 2013 - 01:41

Oct 31 - Global bankinig giants face a bill of of over $100 billion for legal liabilities, leaving some investors feeling jittery over a sector which is still trying to get back into shape after the financial crisis. David Pollard reports.

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$100 billion dollars is today's daily digit - the cost to banks of cleaning up past misdeeds. This week alone - Deutsche, UBS and Lloyds revealed mounting legal bills. Rabobank was fined more than a billion dollars over allegations of interest rate rigging. The massive bill is leaving lenders running scared from areas and markets that put them in potential danger of upsetting regulators. Like HSBC - it pulled out of some Latin American countries after being fined nearly $2 billion dollars for lax money laundering controls. America accounts for the biggest chunk - an estimated $85 billion in credit-crisis and mortgage related settlements - with a record $13 billion settlement by JP Morgan. But Europe is playing catch up - banks here setting aside an estimated $40 billion for legal provisions. And, says Will Hobbs of Barclays, there's no sign of an end just yet. SOUNDBITE (English): WILL HOBBS, VP RESEARCH, BARCLAYS, saying: "It feels like the regulatory and the legal environment is going to be a headwind for the banking sector for some time to come." There are bright spots. BNP Paribas surprised some with its Q3 balance sheet strength. Cost cutting, restructuring and sharp drops in investment banking revenues are other headwinds. And the newsflow continues to darken the mood - most recently with Denmark's Danske Bank lowering its full-year outlook and planning further job cuts. But prospects of recovery should feed, ultimately, through to banks - and investors. SOUNDBITE (English): WILL HOBBS, VP RESEARCH, BARCLAYS, saying: "If you believe that the European economy, the underlying economy, is going to start to recover, then banks are a good way to play that." The only worry over that outlook: litigation, too, could pick up

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Daily Digit: Banks face $100bn clean up

Thursday, October 31, 2013 - 01:41