Banks re­port drop in busi­ness as Brexit uncer­tainty be­gins to take toll

The Guardian - - FINANCIAL - Ka­ly­eena Mako­rtoff Bank­ing cor­re­spon­dent

British banks have seen their first drop in de­mand in five years as Brexit uncer­tainty, reg­u­la­tion and mar­ket volatil­ity take their toll.

The lat­est fi­nan­cial ser­vices sur­vey by the Con­fed­er­a­tion of British In­dus­try (CBI) and the ac­coun­tants Price­wa­ter­house­Coop­ers showed just 24% of firms re­ported a rise in busi­ness vol­umes in the three months to De­cem­ber, com­pared with 32% hav­ing ex­pe­ri­enced a de­cline. The re­sult­ing bal­ance of -7 per­cent­age points – a re­ver­sal from +12 in the pre­vi­ous quar­ter – marks the first con­trac­tion in de­mand since Septem­ber 2013.

The de­cline is ex­pected to con­tinue, with 20% of firms an­tic­i­pat­ing a fur­ther drop in busi­ness vol­umes over the com­ing quar­ter, with 12% fore­cast­ing a rise, a bal­ance of -9 – the weak­est out­look since De­cem­ber 2009.

The re­port said the pes­simistic out­look was in line with “sub­dued prospects for the wider UK econ­omy”, given weak wage growth and the im­pact that Brexit uncer­tainty has had on in­vest­ment.

“A com­bi­na­tion of macroe­co­nomic and Brexit uncer­tainty, reg­u­la­tory com­pli­ance and global mar­ket volatil­ity are tak­ing a toll on the UK’s fi­nan­cial ser­vices sec­tor,” the CBI’s chief econ­o­mist, Rain New­ton-Smith, said. "Fi­nan­cial ser­vices are a bell wether for the wider econ­omy. The per­sis­tent weak­ness in op­ti­mism and the de­te­ri­o­ra­tion in ex­pec­ta­tions sound a warn­ing for the out­look,” she said.

The news comes as big US banks are ex­pected to re­veal the scale of bonuses, with Wall Street lenders re­port­ing their 2018 full-year earn­ings.

Citi will be the first to re­port to­day, fol­lowed by Wells Fargo and JP Mor­gan to­mor­row, and Bank of Amer­ica and Gold­man Sachs a day later. Mor­gan Stan­ley will cap off the week with its re­port on Thurs­day.

While in­vestors will be keep­ing an eye on profit fig­ures, staff will be wait­ing to hear how much they stand to pocket in bonuses. But pay ex­perts say this year’s bonus pools won’t be worth writ­ing home about. “It’s not a year of ma­jor in­creases,” said Todd Sir­ras, a manag­ing di­rec­tor and part­ner at the con­sul­tancy Sem­ler Brossy.

JP Mor­gan’s to­tal bonus pool is set to rise 3% over­all. Within the busi­ness, in­vest­ment bankers will ben­e­fit from a “mid-sin­gle digit” rise in their own in­cen­tive pot, ac­cord­ing to sources.

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