Running Header: ANALYSIS OF BARCLAYS VS ROYAL BANK OF SCOTLAND

Analysis of Barclays Vs Royal Bank of Scotland

ABSTRACT

This paper focuses on analysing the situations of Barclays Bank and RBS Bank through identifying their strength, weaknesses, threats and opportunities. Furthermore, the research paper provides a detail description of the Porter's five forces analysis of the banking sector. In addition to this the paper discusses the concept of risk management and various risks involved in this sector.

Analysis of Barclays Vs Royal Bank of Scotland

Introduction

A credit crisis, or credit crunch, pertains to the decline in the general availability of credit (loans) or an abrupt shrinking and tightening of the terms needed to acquire a loan from the banks. The idea of credit crunch normally refers to a lessening of the credit availability irrespective of an increase in the official rates of interest. In such cases, there is an implicit change in the association between interest rates and credit availability. This change may result in either the occurrence of credit rationing or lesser availability of loans at any official interest rates. Most of the times, a flight to quality by lenders accompany the credit crunch for the reason that they seek to invest in make less risky investments. The credit crisis of 2007 could be considered the worst economic turmoil the world has seen since the Great Depression of the 1930s. As the full effects of the credit crisis are still unfolding, demand for research differentiating among financial firms handling of the crisis is strong.

The global financial crisis of 2007 was comparatively recent in origin as compared to other financial crises, and is possibly persistent until now. The credit crisis refers to the panic ill financial markets ill August 2007. It was triggered by increasing defaults on subprime mortgages and the disruption of the markets for mortgage-backed securities.

Discussion

Before the Crisis

The global financial crises (2007-2010) have hit the share prices of the many banks of UK including the Barclays, Lloyds, Royal Bank of Scotland, HSBC and Standard Chartered.

The share prices of these banks prior to the financial crises were relatively stronger which have been greatly affected since its onset on August 2007.

Also, many banks who bailout after the crises, were prior considered relatively strong in the market in their income and assets base were assumed as the highly potentiated for their growth in the stock market in the coming years.

Economic Analysis

When economies are emerging from recessions rooted in high levels of debt and stresses in the financial system, growth is slower than in the typical recovery. That was the experience of our major markets in 2011. It is what we should expect in 2012 and beyond. In the UK, growth weakened. Total economic activity, as measured by gross domestic product (GDP), grew by 0.8% compared with 2.1% in 2010. At the start of the year, expectations had been more positive, the consensus forecast for growth having been 2.1%. Yet the year ended with the economy contracting. Unemployment rose sharply, from less than 8% in ...