Barclays plans a £2bn cost-cutting drive and aims to return £10bn to shareholders over the next three years. Pre-tax profits at Barclays fell to £6.6bn in 2023, down from £7bn in 2022. Higher interest rates pushed up earnings at Barclays UK, where income rose 5% to £7.6bn. Income at the Corporate and Investment Bank (CIB) fell by 4% to £12.6bn. Barclays also spent £900m on cost-cutting in 2023. CEO C. S. Venkatakrishnan unveils Barclays' first major strategy update in a decade. Barclays will be reorganized into five new divisions. Barclays shares jump 6% at the start of trading in London. Barclays plans to return at least £10bn of capital to shareholders over the next three years through dividends and share buybacks. Barclays' bonus pool fell 3% to £1.2bn for 2023. The bank's new three-year plan aims to improve operational and financial performance and drive higher returns [5327d679].
Vanquis Banking Group reported a loss before tax of £4.4 million ($5.55 million) for 2023 and is resetting its business. The bank aims to return to 'modest lending growth' from the start of the second quarter. Challenger banks like Vanquis have struggled to compete with the dominant 'Big Four' lenders and have faced pressure to consolidate. Vanquis maintained a core tier 1 capital buffer of 20.5%. In the second half of 2023, the bank generated a profit before tax of £30.4 million. Vanquis proposed paying a final dividend of 1 pence per share for 2023, subject to regulatory approvals [f4f879a0].
Lloyd's of London reported a pre-tax profit of £10.7 billion ($13.51 billion) in 2023, a significant turnaround from the £800 million loss suffered in 2022. The commercial insurance market attributed the profit to strong underwriting and investment performance. The underwriting profit more than doubled to £5.9 billion, while investments returned £5.3 billion, aided by higher interest rates. Chief Executive John Neal expressed the intention to continue delivering consistent profitable performance through disciplined underwriting [c42c9c57].
British bank NatWest reported a 27% decline in first-quarter profits, attributed to increasing competition for savings, mortgage, and lending products over the past year. The bank's pre-tax operating profit dropped from £1.8bn to £1.3bn. Revenues remained slightly above market expectations at £3.5bn [049101c1].
British money transfer company Wise forecasts 15% to 20% growth in underlying income this year, a slowdown from the previous year. The company reported underlying pretax profit of £242 million ($309 million) in its 2024 financial year on income of £1.2 billion. Wise's financial forecast indicates steady growth for the year [9386417e].
The UK's biggest banks are set to report lower profits and narrower margins in the coming weeks, but uncertainty over the Bank of England cutting interest rates could revive the tailwind from higher borrowing costs. Higher borrowing costs from the Bank of England pushed lenders' net interest income to record highs last year, but their margins have narrowed into 2024 amid intense competition for mortgages and deposits, and the expectation that rate-setters will make multiple cuts this year. However, in recent weeks, concern over the US economy and stickier-than-expected UK inflation has caused traders to slash their bets on rate cuts from the Bank of England. According to a company-complied analyst consensus, Lloyds is expected to post a pretax profit of £1.66bn for the first quarter, down from £1.78bn in the previous three-month period and £2.26bn in the first quarter of last year. Barclays is expected to post a pretax profit of £2.20bn for the quarter, down from £2.60bn in the same period last year. Natwest is expected to post a pretax operating profit of £1.25bn in the first quarter, down from £1.82bn in the same period last year but little changed from £1.26bn in the previous quarter. HSBC will book a $1bn loss in the first quarter from the sale of its Argentinian business, which came as part of its to focus more on India, Singapore, and China. The lender, which is the largest bank on the FTSE 100, stands out from the rest of the Big Four in its exposure to China, which is grappling with an economic slowdown [45640069].
In a recent analysis, McKinsey & Co warned that the higher profits seen by global banks over the last two years may be 'fleeting.' The return on tangible equity (ROTE) rose to 11.7% in 2023, marking the best period for banking since before the global financial crisis. However, banks may need to cut costs at five times their usual rate to maintain profitability as the US Federal Reserve cut the benchmark rate by 0.5% in September 2024, the first reduction in over four years. The European Central Bank and the Bank of England are also lowering rates, which could lead to net interest margins dropping by 16% by 2030. McKinsey emphasized the need for banks to adopt strategies of current leaders to avoid a decline in profitability [48477c4b].