Business Magazine: the Echo's monthly supplement

IF YOU take the view that any publicity is good publicity, the banks must be feeling very happy with themselves.

Over recent years the banks have rarely been out of the news and, more often than not, the coverage has not been confined to the business pages. Branch closures, use of overseas call centres, claims of 'fat cat' pay awards and, more recently, record profits in the bank sector have reignited claims of overcharging and reckless lending.

The current hot topic is of course the credit crunch brought about by the bursting of the subprime lending market in the US. The ability to package up mortgage debt and sell it has left banks around the globe counting the cost of rising default rates in the US mortgage market.

After the news appeared to be 'leaked' to the media over the weekend, the Royal Bank of Scotland confirmed yesterday it will be tapping shareholders for 12 billion pounds. This additional cash will strengthen the Royal Bank of Scotland's balance sheet that had also been stretched by last year's acquisition of Dutch banking group ABN Amro.

Rival banking group Barclays will come under the spotlight tomorrow as shareholders gather for the AGM. So far the group has been frank about subprime exposure and shareholders will be hoping no nasty surprises are delivered this week. Pubs and drugs will also be in the news this week with Punch Taverns and AstraZeneca due to release trading figures tomorrow. GlaxoSmithKline release their first-quarter figures today and Mitchells & Butlers will round off the week with a trading statement on Friday.

Management at Britain's biggest pub group Punch Taverns may find more attention is paid to the recent decision to call off merger talks with Mitchells & Butlers. The industry is facing difficult conditions as a result of the smoking ban and consumers are also tightening their belts as rising interest rates and higher food and fuel costs take their toll.

The above comments are equally relevant to Mitchells & Butlers, where management are likely to face very similar questions a day later.

The big issue currently facing the drug companies is competition from cheaper generic (copied) drugs. Patents are used to protect valuable drugs from generic competition but patents expire and are increasingly challenged in court.

AstraZeneca recently won a lawsuit against Indian firm Ranbaxy Laboratories after it tried to launch a generic version of Astra's leading heartburn drug, Nexium, in the US. This should help Astra to deliver a reasonably healthy set of figures tomorrow.

DAVID EVANS

8:34am Wednesday 23rd April 2008

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