What a difference a few thousand miles of water make. In the US, when banks announced moves to shore up their balance sheets with fund raising programmes, the markets and press alike loved it.
At last, it was argued, they are getting to grips with the real problem, and doing something about it. They even forgave banks who upped the ante and announced more than once a fundraising effort.
But that was in America.
In the UK, analysts are much alike. News that the Royal Bank of Scotland may be considering a rights issue, was welcomed in the City. Shares surged as a result.
But the public are not so sure. A queue of experts appeared on TV programmes saying there is no reason to worry, the bank is safe. But that does nothing to alleviate fears. After all, the same experts said something similar about Northern Rock. The Northern Rock affair proved that panic is, after all, a good stratagem to adopt.
This morning, few actually asked the question, but the air throbbed with the doubt, is this another Northern Rock?
It isn’t. The markets are right, a rights issue will be a good move. After all, it is running a little low on capital thanks to the purchase of ABN Amro. This was approved by shareholders, who had not realised the credit crunch was going to be so serious. So they can hardly cry foul, and say it’s not fair. If you are a shareholder, you have to take responsibility for your decisions.
But the public are a fickle lot. In the UK it is just plain dangerous for a bank to admit, even by implication, that it has a few problems.
Bradford and Bingley has a similar dilemma. It has denied it is planning a rights issue, but will be watching events with interest; as will the rest of the banks, with rumours suggesting Barclays, who luckily failed in their attempts to gain control of ABN Amro, may follow the RBS move. But then, rumours have followed Barclays throughout the course of the credit crunch like a shadow that won’t go away, even at night time.
The truth is, though, that right now is a time of great opportunity for banks with strong balance sheets. HSBC showed this last week with its plan to match existing mortgage offers with other banks when they come to the end of their fixed period.
RBS must not, and can not, lose out on this opportunity. That’s why the rumoured rights issue is proving such a hit with the City.
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