Not good news.21 Feb 2020 19:34
Sorry. Just think it’s best if you know this stuff. Xx
Why big UK and European banks are struggling to grow returns
Sky's Ian King says the UK bank reporting season has thrown up some common challenges for the country's biggest lenders.
Ian King
Ian King
Business presenter @iankingsky
Thursday 20 February 2020 20:59, UK
The financial offices of banks, including Barclays, Citi, HSBC, in the financial district of Canary Wharf, are pictured from Greenwich in London on October 29, 2017. / AFP PHOTO / Tolga AKMEN (Photo credit should read TOLGA AKMEN/AFP/Getty Images)
Image:
Canary Wharf is home to both HSBC and Barclays
Why you can trust Sky News
The big four lenders that dominate the UK's banking market - Barclays, RBS/NatWest, HSBC and Lloyds - have completed reporting their results for the year and, with those results, there were some common themes.
Perhaps the most important theme was this.
Lloyds, Barclays and RBS/NatWest all lowered their targets for "Return on Tangible Equity", or RoTE, for the year.
Barclays bank logo
Image:
Barclays has admitted it will be difficult to hit its 10% RoTE target
RoTE is a very important measure of profitability for a bank and its shareholders.
Simply put, it is a measure of how effective a bank is at generating profits from its equity, the money invested by its shareholders. A RoTE of 10% is regarded as reasonable.
Advertisement
So, when banks cut that target, it suggests they regard their prospects as having deteriorated.
To take them in turn: Barclays announced on Thursday last week that it achieved a RoTE of 9% for 2019 but admitted that it would be "challenging" to hit the target of greater than 10% it had hoped to achieve in 2020.
More from Business
Johnson poised to axe network of business councils
Barclays scraps spyware on staff computers after backlash
Steel production to return to Redcar 'within three years' after SSI deal
PPI hits Lloyds gains as bank reports 26% drop in pre-tax profit
Struggling Victoria's Secret changing hands through sale of controlling stake for $525m
Airlines reveal the cost of coronavirus outbreak
The following day, Alison Rose, the new chief executive of RBS - soon to change its name to NatWest - admitted that, while the bank achieved a RoTE of 9.4% in 2019, she was abandoning the target of 12% set by her predecessor, Ross McEwan.
Instead, she said, the bank was targeting a RoTE of 9% to 11% "in the medium to long term".
preview image
Bank boss denies crisis link to NatWest rebrand
On Thursday, Lloyds Banking Group reported a RoTE for 2019 of 7.8% but insisted that, had it not been for another thumping set of provisions for past mis-selling of Payment Protection Insurance, the underlying figure was closer to 14.8%.
But it too reduced its expectations for this year, saying it was targeting a RoTE of 12% to 13%, down from the previous guidance of 14% to 15%.
As for the other member of the bi
Sign In
Follow the stocks
