Trouble ahead

Article Abstract:

The United Kingdom banking industry has seen a rise in stock prices in 1997, and banks account for nearly 16% of the UK FTSE All-Share index. Banks are undergoing a process of consolidation, and initially this should brong good returns for investors. Once consolidation has been achieved, the picture could change as the remaining few large banks compete intensely with each other, according to Charterhouse Tilney's Richard Jeffrey. The sector could be hit by low growth and difficulties in differentiating its product. There are parallels with UK food retailing, which has undergone similar changes.

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Retail banks

Article Abstract:

Banks tend to be affected by business cycles and this affects bad debt provisions. Mortgage banks are less affected by business cycles. United Kingdom banks are achieving record profits and have shed many employees. Credit management has improved through improvements in the way computers are used. Lloyds TSB is seen as a success story, though mergers are no guarantee of success. Competition from supermarkets is affecting banks, and new technology means more new entrants are likely.

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Banks

Article Abstract:

United Kingdom bankshave low levels of bad debt, strong profits and costs are being reduced by new technology. There is concern that competition could increased if the economic environment remains benign. There has been slow top-line growth. New entrants to the UK market include Standard Life and Egg. Savings accounts have become less profitable as a result of low rates of interest. Competition could come from larger banks from mainland Europe.

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