Wave of Bank Loss Continues led by RBS, CM.to, HSBC - Who to believe?

For those of you who missed the slaughter yesterday, gold's now down below $900 again - first time in over a month. The loss of gold futures yesterday was summarized as a drop in overall commodities with oil dropping by $22/barrel to $120.

With the drop in commodities surely interest is set to go up for the banks and such... has the economy already recovered?

Not so fast... another array of bad news is seemingly inevitable in light of recent headline.

August 3, 2008 Royal Bank of Scotland poised for biggest loss in UK banking history

Britain's second largest bank expected to reveal it has lost £1 billion in first half

THE Royal Bank of Scotland is poised to unveil the biggest loss in UK banking history after taking a hit of almost £6 billion from the credit crisis.

Britain’s second-largest bank is this week expected to reveal a pre-tax loss of at least £1 billion for the first six months of the year, with analysts warning it could slide to as much as £1.7 billion in the red.

The loss would be roughly five times higher than the deficit racked up by Barclays in 1992 at the height of the last recession.

RBS chairman Sir Tom McKillop is already under pressure from investors after the bank’s recent £12 billion rights issue. His chief executive, Sir Fred Goodwin, who marks 10 years at the bank this weekend, also faces shareholder scrutiny.

The bank is scouring the world to find three new non-executive directors to shore up its board in response to shareholder concerns.

The RBS figures will cap another terrible week for Britain’s biggest banks as the credit crisis continues to take its toll.

HSBC is expected to write off almost $7 billion (£3.5 billion) in bad debts at its struggling American business from the first six months of the year. The charge will drag its profits roughly 30% lower to about $10 billion.

Barclays is forecast to reveal a 35% drop in profits to £2.6 billion as bad debts around the world, particularly in South Africa, combine with further losses from its exposure to the credit markets.

Some analysts believe Barclays could chalk up another £3 billion of writedowns, in addition to the £1.7 billion it recorded in the first quarter.

Scary isn't it? Even those banks that seemingly had its hands clean from the subprime is uncovering some nasty skeletons from their closets... TD Canada Trust (TD on NYSE) and HSBC.

HSBC Holdings PLC, Europe's biggest bank by market value, reported the steepest earnings decline since 2001 on record subprime mortgage defaults in the U.S.

Net income for the six months ended June 30 dropped 29 per cent to $7.7 billion US, or 65 cents a share, from $10.9 billion, or 94 cents, a year earlier, the company said Monday. Chairman Stephen Green called the outlook "highly challenging."

HSBC, the first European bank to take losses on U.S. subprime mortgages, set aside an additional $10.1 billion this year.

With that in mind it's difficult for a rational person to realisticly expect any of their investment and dollar holdings to be secure 100% in a traditional bank. After all, IndyMac was trading at $35/share a year before its full collapse and a literal bank run (grab your cash while you can!!) last month!

Newsletter writer ClifDroke, featured regularly on Financial Sense, a great network of well respected writers and analysts (Doug Casey and guru James Turke , recently commented on a few junior stocks worth looking at.

Mag Silver (MAG on TSX at $9.67), NAK Northern Dynasty of the Pebble Deposit fame at $7.19, and our perennial favorite, the resilient stock that just comes back every time, TNR Gold Corp ($0.25).

Mr. Droke goes on to refresh readers on the key properties:

1. El Salto - 6km x 1km huge property capable of hosting many world class mines - water, road, fully accessible year round (weather moderate at 1500m elevation). Tremendous potential - pending drilling results from 6000m drill program releasing soon?

Famous belt of Gold-Copper mines called "Yellow Belt" - Barrick and Yamana both have large holdings there... Lundin still holds company called Suramina Resources there still. (read: Lucas Lundin manages it).
Last I remember, Barrick also owns 10% of TNR. If that doesn't mean a vote of confidence I don't know what will!

2. El Tapau - Just started drilling recently - very promising especially with past results of 0.7% Copper over just a shallow 100m+? Hopefully assays are faster now that so many mining companies are moving out due to cold weather!!

3. Eureka - I like this one personally - after all Penoles is a respected mining company in Mexico - and they provided a historic estimate of 60 million pounds of 1%+ Copper and 1 gram/ton Gold

In case you don't know who Penoles Minerals are - they are operators of the world’s richest silver mine and Mexico’s richest and largest gold mines - I'm talking about the equivalent of Barrick!! - Safe to say the report shouldn't be too far from the truth... but like most investors I am awaiting the 43-101 to fully have my confidence in the estimate... keep in mind this was based only on 70m of 450m depth of explorations too!!

Industrias Peñoles really has a silver lining -- the company is one of the world's largest silver producers. Peñoles has proved and probable reserves of more than 350 million ounces of silver, some 4 million ounces of gold, 6500 thousand tons of lead, and 2 million ounces of zinc. It is also involved in several mining joint ventures, as well as mining exploration projects in Peru. The company's Metals segment smelts lead, refines silver, and produces sulfuric acid and other smelting byproducts. Its Chemicals group produces such chemicals as sodium sulfate and ammonium sulfate. Exports account for nearly two-thirds of sales. Peñoles is part of Mexican conglomerate Grupo BAL.

4. Los Azules - Minera Andes - inferred resource by 2008 - 25% back-in - always interesting
and puts more "minerals in the ground" for the company so to speak - should help stabilitze TNR's valuations once it comes... less than 1/2 year away if MAI.to sticks to their promise (which they have been impressive on so far)

That's it for today, happy investing everyone!