U.K. Lending Shows Sharp Drop in Nov., But No One is Sure Why (BCS) (RBS) (HBC)

December 27, 2012 7:58 AM EST
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According to the British Bankers' Association (BBA), lending from U.K. banks to businesses outside of the financial sector fell £3.1 billion (about $5 billion) in November, the sharpest decline since June 2012. Data shows that lending rose £300 million in October. Lending over the previous six months was down £900 million on average.

The cut in lending might signal more than just weakness in the U.K. economy. Regulators are looking for the institutions to firm up their balance sheets with more cash to cushion any downturn.

But, it's a catch-22 of sorts. The Government and Bank of England say the lack of lending is tampering consumer spending and business expansion, which is pressuring the economy as a whole.

From the BBA's perspective, the drop reflects businesses not looking to borrow, rather than banks not willing to lend.

Additional data from the BBA shows that consumer credit supply fell £0.1 billion in November, narrowing from a £0.2 billion drop the prior month.

Mortgage lending accelerated from £0.1 billion in October to £0.2 billion last month.

Banks on watch today include Barclays (NYSE: BCS), HSBC (NYSE: HBC), Lloyds (NYSE: LYG), and Royal Bank of Scotland (NYSE: RBS), the largest U.K. banks.

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