Not allowed to make a profit21 Oct 2023 17:53
Britain’s biggest banks will face fresh scrutiny next week when they are set to report another quarter of robust profits thanks to higher interest rates and amid a continuing cost of living crisis.
City analysts expect Lloyds Banking Group, Britain’s largest domestic lender, to reveal on Wednesday that its pre-tax profits rose by about a fifth year-on-year to £1.8 billion in the three months to the end of September. On Friday the taxpayer-backed NatWest is forecast to unveil a 25 per cent rise to almost £1.4 billion in the third quarter.
NatWest also faces speculation about its board’s final decision on the payoff due to Dame Alison Rose, its former chief executive, who abruptly stood down in July over her role in the Nigel Farage account closure scandal. Speculation is growing that the board will dock her pay package over the debacle, in which she admitted to briefing the BBC with incorrect details about Farage’s personal finances.
Sources have suggested that an announcement of the board’s decision may come after the quarterly results. NatWest, which will base its decision on a review conducted by Travers Smith, a law firm, said its position “will be published in due course”.
The Farage scandal has come at a time when the industry faces criticism that it is benefiting at the expense of savers. Third-quarter profits at Lloyds and NatWest are expected to have been propelled higher by Bank of England rate rises, which have allowed commercial lenders to expand their margins.
NatWest is among the high street banks preparing to release updated figures
NatWest is among the high street banks preparing to release updated figures
High street banks have been much slower to pass on interest rate increases to their savers than they have been to their borrowers. Politicians including Jeremy Hunt and the Commons Treasury committee have criticised banks over this, while the Financial Conduct Authority has urged the industry to speed up rate increases for savers.
The banks’ results are likely to show the impact of this recent pressure. While their third-quarter margins will have risen year-on-year, compared with the second quarter they are likely to have dipped, as banks lift savings rates and as depositors move money to take advantage of better offers.
Harriett Baldwin, the Conservative MP who chairs the Treasury select committee, said it had “repeatedly made it clear that higher interest rates must mean better rates for savers”.
Pre-tax profits at Barclays, due on Tuesday, are expected to slip to about £1.8 billion from £2 billion a year earlier. Unlike Lloyds and NatWest, Barclays runs a large investment bank and this division was boosted last year by an increase in bond trading. Revenues from the fixed-income unit are likely to be lower this year. Analysts also expect Barclays to take an impairment charge for possible bad loans of £570 million, up from £381 million a year earlier.
While higher rates boost bank profits, th
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