Bank Of England Makes £1 Billion Profit

Banks are doing badly? Well..most banks maybe. For now.

The Bank of England yesterday revealed it has made its biggest profits since its foundation in the late 17th century. £995 million pounds made from lending its money. The bank charges a fee on the money it lends. As the bank is lending far far more than it would under normal circumstances, it has made greater profits.
And the banks themselves are generating greater profits. Or rather greater margins than they could make before the crunch on mortgages and loans. But greater margins will lead to great profits if continued growth and demand can be sustained. Reduced competition as competitors collapsed or retreated to their own countries have left the survivors potentially in a stronger position. Lloyds (LLOY.L) shares up already since Victor Blank (cheque..OK, MW) decided to slip away yesterday.

The Mail thinks that the Tories may have to split Halifax from Lloyds banking group if they are in power. The worry is the banking groups will grow very quickly and become very powerful once again. Future governments are looking for institutions that are NOT too big to fail.

Would a government do that? With Tesco (TSCO.L) about to enter the market? And the oft promised, never to materialise Postbank still being vaguely mooted by the government.

I think it would depend a lot on the banking group’s situation in 2010.

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