The banking profits bonanza has reached its peak
Banks will reveal whether Britons are benefiting from lower interest rates in their first major update since borrowing costs were cut this summer.
Investors will be curious to see whether July’s rate cut has been passed on to mortgage and lending customers as Barclays, NatWest and Lloyd’s report third-quarter results this week.
Analysts say net interest margin – a measure of the difference between what a bank pays out in deposits and what it generates in loans – has peaked, ending an era of huge bank profits.
It comes after the Bank of England cut the base rate from 5.25 to 5 percent in July, which should have a knock-on effect on borrowers but also hit lenders’ profits.
Lloyds, which also owns Halifax, is expected to report a profit of £1.6 billion in the three months to the end of September, compared with £1.9 billion a year earlier.
Telltale signs: Investors will be curious to see if July’s rate cut has been passed on to mortgage and loan customers as Barclays, NatWest and Lloyd’s report third-quarter results
Barclays is expected to announce profits of £2 billion, up from £1.9 billion, and NatWest £1.5 billion, up from £1.3 billion.
Investors will also study loan and deposit growth, any asset impairment, litigation costs and cash returns to investors.
Russ Mold of broker AJ Bell said: ‘Net interest margins appear to have peaked. That’s key to why analysts think banks will struggle to grow profits materially from here on out.”
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