Blighted by past blunders

LEGACY issues still hover over Barclays and Royal Bank of Scotland like skulking vultures. At Barclays, the possibility of a prosecution or a deferred agreement with the Serious Fraud Office over the Qatari fundraising in 2008 and a stand-off with the US Department of Justice on mortgage securities are historic uncertainties.

Added to that is the issue of chief executive Jes Staley trampling over whistleblowers’ rights in an incident that could cost him his job.

RBS also has a US mortgage securities problem, still suffers reputational and financial damage from the rapacious behaviour of its Global Restructuring Group, and is battling with the European Commission on ways of addressing the state subsidy question.

Strip away all this and one can see the underlying trends. Under the patient guidance of Ross McEwan, there are signs of light at the end of a long tunnel which reaches right back to Fred Goodwin.

There is a capital rebuild under way, intended to allow RBS to pay dividends and sell down the taxpayer stake. For the first time in a couple of years there was a modest profit in the first quarter built around newer business lines such as home loans as well as more traditional consumer credit, small business and commercial lending.

At Barclays there was a hit from the unfortunate carryings-on in South Africa, which has decimated the rand and the value of the assets Staley is determined to sell. Britain looks a little flat and the investment banking operation sub-par when compared to American counterparts.

It is worth remembering that Goldman Sachs also had a disappointing quarter when checked against full- service banks such as JP Morgan and Citi.

RBS and Barclays will be far more investable once the uncertainties around mortgage securities have been resolved. The fact that the Department of Justice has been so slow to deal with UK lenders suggests that mercantilism is in play.

It would be nice to think that Mrs May’s friend in the White House, who wants to end the victimisation of Wall Street, could offer Britain a helping hand.

Don’t hold your breath.

Half full

YES, first-quarter growth data at 0.3pc is disappointing against the 0.7pc in the final months of 2016 and a consensus forecast of 0.4pc. It should not be very surprising.

Early months of the year tend to be weak, coming after holiday spending splurges.

We should also remember that the UK is in its eighth year of recovery, so there is bound to be slippage. Nevertheless, there are good reasons to feel chirpy.

Critics like to blame Brexit and the pound for the squeeze on household incomes. But what really did for prices was the resurgence in oil prices, felt in our energy bills. That looks to be over, with some post-Trump increase in production in the US where market interference has been eased.

If inflation returns to its target of 2pc faster than expected then the squeeze on real wages should be less intrusive.

There are other upside factors to consider. Unsecured credit may be too high but debt- to-income ratios are well under control and there is a bit of a ‘wealth effect’, with homes and savings held in shares more valuable.

Manufacturing is relatively robust and the benefit of the global upturn – the IMF is forecasting global output of 3.5pc in 2017 – together with the competitive exchange rate for sterling should deliver.

Construction came down with a bump in the past few months but there is room for expansion, given Britain’s housing needs.

One doesn’t want to be a Pollyanna about these things. Since the Great Recession, the chattering classes have discounted the UK’s ‘resilience’. The IMF’s word, not mine.

Global value

GREAT entrepreneurs such as Sir Martin Sorrell, spokesman on the world, need to be loved. But his pay came down with a bump in 2017 from £70.4m to £48.1m.

Nevertheless, he has collected £210m from advertising agency WPP since 2012. He also earns around £12m in dividends from his holding in the company, valued at £357.6m.

That shows an admirable willingness to align his interests with those of other investors. But it shows no sensitivity at all to Britain’s squeezed middle or Theresa May’s desire for more fairness.

A marketing and PR guru of such titanic reputation should recognise the pratfalls.