At the start of the week it was almost "credit crunch, what credit crunch?". Shares in Britain's bombed-out banks surged as a tide of optimism engulfed the sector. As Barclays and HSBC announced bumper profits and their bankers salivated over the bumper bonuses to come, it was almost as if the past two years hadn't happened.
Enter Stephen Hester and RBS with a cold dose of reality yesterday. The "£10m man" poured a bucket of icy water over all that exuberance with a stark reminder of where we stand. What was interesting about his performance was how different in tone it was to that of his counterpart at Lloyds Banking Group, Eric Daniels. Unlike Barclays and HSBC, both Lloyds and RBS have been bailed out by the taxpayer and lack their rivals' main advantages (in Barlcays case a Premiership investment bank; in HSBC's a formidable international reach and presence in the powerhouse economies of Asia).
However, Daniels confidently predicted bad debts had peaked at Lloyds and likened its presence in the Government's asset guarantee scheme to little more than "householders' fire insurance". RBS said two very different things – the guarantee scheme is "essential" amd bad debts will go on rising for some time even if the economy has started to recover. Hester hopes it has, but he's not banking on it.
Of course, these are different banks at different stages of restructuring and with different junk on their balance sheets. But not so different that they can both be right about bad debts, and an impartial assessment of the facts suggests Hester may be closer to the mark than Daniels.
Bad debts usually go on rising for months after the end of a recession. It takes times for companies which have struggled to finally give up the ghost. The same is true for individuals.
Lloyds actually admitted as much, but seems to be saying "except in the case of our clients". Its under-fire chief executive had better hope that his optimism is not misplaced, and so had the British taxpayer.
Hester's more sober assessment is probably closer to reality and with both banks' shares falling yesterday, the market appears to agree. Sure, we will come out of this but the road ahead will be very bumpy – probably much bumpier than Daniels is letting on.