Staley defies the critics

Jes staley has had more than his fair share of ethical issues to deal with, but his judgement that Barclays is europe’s most credible investment bank is valid.

The chief executive’s strategy has knocked the divestment campaign of maverick investor ed Bramson of sherborne out of the ball park.

Volatile markets in the pandemic produced a rise in foreign exchange, bond, debt and share trading, providing a hedge against dreadful Covid-19 loan losses.

The underlying numbers from Barclays, and even more dispiriting results from Ana Botin’s santander, do not augur well for Natwest and Lloyds, which lack other streams of income.

Barclays tells us how bloody the pandemic is going to be for the big lenders.

In the worst scenario, the Office for Budget Responsibility estimates that, of the £50bn or so of Covid-19 lending, some £32bn could be rotten and land on the exchequer. The bounce back scheme is 100pc guaranteed by the Treasury but banks are exposed to at least 20pc of the other bailout credits.

Banks cannot divorce themselves from the daily toll of administrations, recapitalisations, insolvencies and credit card defaults. Loan losses in the first half of this year for Barclays were a hefty £3.7bn.

What will be alarming for all holders of bank shares will be the £593m provisions at Barclays’ consumer arm, mainly from credit cards. At Lloyds, Antonio Horta Osorio doubled down on credit cards in 2016 when he splashed out £1.9bn on MBNA.

santander UK looks like a bloodbath. Botin has taken the axe to the goodwill in the accounts dating back to the purchase of Abbey National in 2004, resulting in a writeoff of £5.6bn.

The spanish-controlled bank has taken advantage of a health scare to get all the bad stuff out there, resulting in a charge of just under £18bn when global write-offs and pandemic loan losses are added together.

Any idea Madrid may have had of cashing in on santander UK through a flotation look to be dashed.

Botin’s great hope rests on its Brazil and Mexico operations which have been flourishing. Given, however, that Brazil is among the countries most affected by coronavirus, it isn’t necessarily going to be much of a counterweight to difficulties elsewhere.

The best that can be said from this first batch of bank results is that Covid-19 is testing the banking reforms post-financial crisis, and so far so good. Buffers built up in good times have supported lending and, by putting the lid on dividends and bonuses, capital has been conserved. Banks are unlikely to emerge unscathed. The scale of loan losses and writedowns is alarming.

It wouldn’t be surprising if investors in bank shares could be tapped up for more equity before the nightmare is over.

Lifeguards

As A global leader in vaccines, Glaxosmithkline should be flying in the pandemic. In creating a Covid-19 vaccine it is on the high road in partnership with sanofi, and a big order of 60m of doses from the Government should be a confidence booster.

Paradoxically, the closure of surgeries globally means, with the exception of children’s inoculations, the vaccine arm has been punished.

Much attention at Glaxo will be on the first-half earnings shortfall and there will be unfortunate comparisons with Astrazeneca, which strengthened its oncology medicines this week with a £4.8bn investment in Japanese pharma company Daiichi sankyo.

Glaxo is not standing still. Its vaccine for respiratory syncytial virus, a big cause of deaths among children under one, has passed a significant regulatory hurdle.

It is also effective on older people and could save up to 14,000 lives a year among this group in the Us.

The more serious issue for Astra and Glaxo is the ethical scrutiny of one-off Covid vaccine deals with the UK and other Western democracies.

Bad Arm

OPeN war has broken out between smart chip designer Arm and its former whollyowned Chinese offshoot.

Beijing-supporting staff have rallied behind Arm China boss Allen Wu, who the Cambridge-based company accuses of disruptive behaviour.

Owner softbank’s sale of a 51pc stake in Arm China to Chinese interests is a giant security, technology and geopolitical error. so predictable, and so depressing.