UK’s biggest banks set to report record annual profits

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The UK’s biggest banks are set to report record-high profits after a year that saw lenders benefit from higher borrowing costs, as they face questions over the outlook for the year ahead.

Barclays, HSBC, Lloyds and Standard Chartered will report their financial results for 2023, on Tuesday, Wednesday, Thursday and Friday respectively.

On Friday, NatWest revealed its biggest yearly profit since 2007, before the global financial crisis, and a fifth higher than the previous year.

The five banks are forecast to make combined pre-tax profits of more than £50 billion, which would be a record-high amount and ahead of the pre-financial crisis peak in 2007.

HSBC is forecast to report a profit of 34 billion US dollars (£27 billion) and analysts are expecting Lloyds to have made £7.4 billion last year, which would top previous record earnings for the groups.

Barclays is estimated to report a £6.7 billion pre-tax profit, lower than highs earned in 2021.

It is also due to update shareholders on its much-anticipated strategy for reducing costs, which is set to involve restructuring.

It comes after NatWest said it was focusing on managing business costs and making the group more efficient amid a tougher climate for the UK economy – which fell into a technical recession at the end of last year, according to official figures.

But bumper profits over 2023 were driven by banks making more money from more expensive loans and mortgages, compared with what they paid out to savers, as the Bank of England raised UK interest rates.

This difference is known as a net interest margin (NIM).

But with the banks having come under more pressure to reward savers, and as interest rates are expected to be reduced this year, the measure could be in sharp focus.

“The outlook for 2024 may end up being more important than the results themselves”, suggested Matt Britzman, an equity analyst for Hargreaves Lansdown, as the “tides look to be turning” for the banking giants after a bumper year.

“As a traditional lender with operations geared toward interest income, net interest margin is key”, he said of Lloyds Banking Group.

“With consumers under pressure, loan default commentary and the value of impairments Lloyds takes will be watched closely.”

He added that the size and scale of restructuring efforts at Barclays will be “the biggest question mark overhanging” the bank.

While investors will be looking for reassurances from HSBC that the global bank has not been impacted by volatility in China’s property market.