Elephants, rooms.

From an article in the City AM:

BANKS will come under renewed pressure to extend credit to small businesses this week as the UK's five largest lenders reveal combined pre-tax profits of nearly £12bn. With the stronger players returning to pre-financial crisis levels of success, a fresh row is brewing between politicians – who are demanding more finance for enterprises – and bank executives, who say they need to build up their capital positions.

In a remarkable bounce-back from the lows of the financial crisis, state-owned Lloyds Banking Group and Royal Bank of Scotland are expected to report a return to profitability for the first half of the year.

Most of those lovely profits because of the soft government loans and guarantees and taxpayer funded bail outs generally (I'll exclude HSBC from that generalisation), as well as the Labour government's relatively successful attempts to keep the house price bubble inflated to prevent further loan write downs, of course. But you'd hardly expect either banks or politicians to admit it in public.

The BBA veer dangerously close to the truth at the end of the article:

The British Bankers' Association immediately hit back. Chief executive Angela Knight said: "There are funds available to lend to firms with a viable business plan. But the industry's ability to support the economy needs to be considered as the increased capital and cash we are required to hold cannot both be set aside and used to finance lending."

Of course, what she daren't say too loud in public is that UK banks are due to repay up to £400 billion in loans and guarantees to the UK government over the next couple of years, with as much again in short term finance falling due for repayment or refinancing in the next eighteen months. And that is a heck of a lot of money, i.e. about half of all loans secured on UK land and buildings.