Bumper profits at banks increase the likelihood of a windfall tax on lenders

Bumper profits at banks have increased the chance of a windfall for lenders.

Barclays was the last to release its third quarter results, posting a £2bn profit, boosted by rising interest rates and glowing activity among its trading clients.

But chief executive CS Venkatakrishnan – known as Venkat – warned Chancellor Jeremy Hunt that higher levies on banks could hurt the UK’s competitiveness.

“London has been a global financial center for centuries and we want it to remain a global financial center for centuries to come,” said the 56-year-old.

‘It has all the possibilities: the infrastructure, the excellent financial supervision. ‘An important part of this is a predictable tax regime. “These are the ingredients needed to make it — and it’s important that these ingredients are present.”

At Santander UK, profits reached £496 million. Standard Chartered, which is listed in London but makes most of its money in Asia, raised £1.2 billion. European lenders, who are also in the crosshairs of governments over a windfall, were also in the money.

Deutsche Bank reported one of its strongest quarterly results since before the financial crisis, with UBS, Unicredit and Santander’s Spanish parent company Banco Santander also beating expectations.

Lenders have been helped by rising interest rates, which means they can charge borrowers more while not raising the savings rate as much, netting the profit on the difference. In Barclays’ UK division alone, this so-called net interest income reached £4.3bn in the third quarter, up 10 per cent on last year.

Investment bank lenders, such as Barclays, have also been boosted by market volatility as their clients trade more frequently.

Barclays’ division, which trades bonds, currencies and commodities, saw revenues rise 93 percent to £1.5 billion. This helped offset the decline in investment banking fees made by the closing of deals as the wave of mergers and acquisitions that swept the world last year weakened.

At Santander UK, profits reached £496 million

But the bank’s performance was weighed down by a £327m fine imposed by US regulators over a trade blunder in 2018. Barclays and its rivals have also been forced to set aside more money to prepare for loans that turn sour. as households and businesses struggle through the problems. economic downturn.

Barclays tucked away £381 million in the third quarter, although Venkat said there were no signs of loan book stress. Families were wise, he added, taking off their mortgages to set lower rates and cut spending on non-essentials like clothing.

Santander has also set aside £138 million for this purpose. Shares in Barclays fell 0.3 percent or 0.4p to 149.82p and Standard Chartered fell 5.1 percent, or 28.4p, to 526p.

John Moore, senior investment manager at investment group RBC Brewin Dolphin, said: ‘There is a warning to… [Barclays’] statement and little news about returns for shareholders – perhaps in response to the recently suggested prospect of a windfall tax on banks.’