Broker snap: ICB report not as bad as it could have been

12th Apr 2011 12:47

The report issued by the Independent Commission on Banking (ICB) could have been worse, according to Credit Suisse."While the commission is considering ring-fencing retail banking operations, it appears open to the idea that the business can still exist as part of a wider group, effectively ruling out full separation of retail and investment banking operations," said analyst Jonathan Pierce.Additionally, the ICB believes that Basel III's requirement of 7% equity tier one ratio (ratio of equity capital to risk-weighted assets) is extremely conservative and has proposed a ratio of at least 10% for UK retail assets, in line with Credit Suisse's suggestions."That banks might be able to move capital between the retail and wholesale bank - subject to the retail operations maintaining standalone requirements - is also helpful, allowing them to retain diversification benefits and the possibility that one part of the group could save another part of the group," said Pierce.However, Credit Suisse notes that uncertainty will remain particularly around the cost of ring-fencing retail operations and the amount of loss-absorbable debt that will be required.The broker sticks with lender Barclays as its favourite UK domestic bank buts says that with a 12-month target price of 360p, it "can't get overly excited on the upside potential."---bc