Posted by Morgan on 13th Aug 2009
You won't often see us talking up Robert Peston but he makes some very good observations in his recent blog on why Quantitative Easing is not leading to more bank lending.http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/08/what_rbss_results_say_about_qe.html
There is a strong correlation between the strength of bank balance sheets and the volume of capital available for commercial real estate? Banks have to shrink their loan books and the toxic world of property is a great place to start.
To support Peston's theory here is one little anecdote. The best performing loan originator at one major bank group is currently deemed a start performer having only written two loans in 2009. The reason being that he has won a load of new deposits, from cash rich property investors. He has lent about £100m and collected £500m of deposits. His perfect customer has lots of cash and no need for troublesome new loans.
As my grandfather used to say, "that's the problem with banks, they only want to lend money to people who don't need it!"