A test of investor appetite for bank shares is about to take place. Burnt badly during the 2008 banking crisis, some investors have shied away from owning bank shares. But in the not-too-distant future City institutions seem likely to be asked by the government if they want to buy shares in Lloyds Banking Group, while the management of Barclays will seek support from its existing shareholders for a near £6bn cash call.
Coming down the slipway, probably next year, are potential stock market flotations of branch networks being spun out of bailed-out rivals Lloyds and Royal Bank of Scotland. City institutions will need to decide which of these to back and which ones to leave alone. The branch floats are still some way off so the first decisions will be needed on Lloyds and Barclays.
Analysts say each offers different prospects. Lloyds is a play on the domestic economy, Barclays a play on the international scene and the investment banking arena. For this reason it need not be a toss-up between two. Even so, there is a perception in the City that a race is on to get institutions to dig deep into their pockets. One alternative doing the rounds is that big institutions could trade in their Barclays "rights" and use the cash to buy shares in Lloyds.
It all adds up to a busy summer period for investment bankers who have been yearning for action during the economic downturn.
