NatWest’s update was followed on Tuesday by Barclays, which announced its results alongside major restructuring plans that will reduce the emphasis on its investment bank.
Barclays made a pre-tax profit of £6.6bn in 2023, 6% lower than the previous year and a slightly sharper drop than expected. Regardless of the fact that Barclays’ profits fell, £6.6bn is still a big number.
READ MORE: Shares up in Edinburgh bank NatWest as Thwaite named chief
And in the event, investors showed they were more interested in the details of the bank’s revamp plans. Shares in the institution rose sharply after Barclays said it was looking to remove around £1bn in costs, rising to £2bn in 2026, alongside a pledge to return up to £10bn to investors over the next three years.
All in all the plans were embraced by those holding shares in the bank, but not everyone connected to Barclays will be pleased.
The bank, which this month acquired Tesco Bank’s credit card, loans and savings business in a deal worth up to £700m, cut around 5,000 full-time posts in the final quarter of 2023, with the axe falling largely on back office and support staff and UK operations.
The latest restructuring has raised the prospect of further job losses, though on Tuesday bosses said they did not yet have a “specific headcount target”. Barclays currently has a global headcount of around 94,400.
HSBC, which is heavily exposed to Asia, saw the biggest intra-day fall in its share price since 2008 yesterday, after a $3bn write-down on its investment in China’s Bank of Communications dragged fourth-quarter profits down by 80% to $1bn. Its annual profit surged by $13.3bn to $30.3bn, driven in part by the “higher interest rate environment”.
City watchers meanwhile expect Lloyds Banking Group to announce that profits increased to more than £7.4bn in 2023 when it updates the market today.
A major driver of profits at the UK-based banks over the last two years has been the rapid rise in interest rates. The base rate has been increased by the Bank of England from a historic low of 0.1% in December 2021 to the current 5.25% as the Old Lady of Threadneedle Street has sought to tame surging inflation.
The higher rates have turbocharged the income banks generate from products such as loans and mortgages. However, they have also made life more difficult for those trying to get on to the housing ladder and for people renegotiating mortgages when deals fixed at lower rates of interest expire.
And there continues to be evidence that the banks are not doing enough to share the benefit of the higher interest rate with savers.
READ MORE: Glasgow hi-fi pioneer Linn toasts 50 years in business
New analysis published this week by Moneyfacts, the retail financial data provider, signalled that the big UK banks are still failing to make their easy access rates more competitive. This is despite continued focus from the Financial Conduct Authority (FCA) around consumer duty rules, which were brought in to set higher standards of consumer protection.
Analysis of the Moneyfacts consumer duty audit tool for savings found that the flexible easy access accounts from the big banks (Barclays, HSBC, Lloyds, NatWest and Santander) all remain in the bottom half, with all now paying less than 2% gross interest.
HSBC pays 1.98% on its Flexible Saver and Barclays offers 1.65% on its Everyday Saver, placing both banks in the third quartile. They are joined in the third quartile by NatWest, which pays interest of 1.74% on its Flexible Saver, and Santander, which offers 1.7% on its Easy Access Saver. Lloyds was ranked in the bottom quartile, paying 1.4% in gross interest to those who invest in its Easy Saver account.
James Hyde, a spokesman for Moneyfacts, said: “Despite the continued focus on the passing of interest rates onto savers, the big five banks are still yet to make their easy access rates more competitive in relation to the rest of the market.
“The big banks’ most accessible no-notice accounts remain in the bottom quartiles of the market, with the only rate change to these products in recent months being Santander slashing the interest paid on its Easy Access Saver from 2.50% to 1.70%. That account sits alongside the equivalent products from Barclays, HSBC and NatWest, towards the bottom of the third quartile, while Lloyds Bank’s 1.40% offering does occupy the bottom tier.
READ MORE: Springfield signals ‘cautious’ optimism over market outlook
“The Financial Conduct Authority’s regulations around consumer duty directed financial services institutions to offer fair value, and the big banks are still failing in some areas to meet those expectations. With new rules regarding closed accounts coming into effect this summer, it remains to be seen if there is more urgency to improve rates going forward.
“Having all offered fixed-rate bonds that sat in the top quartile of the market as recently as November, only Barclays Bank remains in that top group – but the other four have seen their products become less competitive in the market, with all dropping to the second quartile.
“As always, it is down to customers to proactively monitor savings rates and switch if they feel their loyalty is not being adequately rewarded.”
Of course, savers who do not require easy access to their money and are able to lock into products such as fixed-rate savings bonds or individual savings accounts (ISAs) will find they are able to access higher deposit rates. But it is nonetheless disappointing to see that the major high street banks are not being as competitive as they could be on easy access savings accounts.
As the financial results from the big UK lenders have consistently shown in recent months, the rise in base rates has powered profits to extraordinary heights. Much of the benefit is inevitably being passed on to shareholders. Surely it is not too much to ask for ordinary savers to gain from these vast profits too.
