UK banks: reaping the profits of doom?
The annual UK bank reporting season is in full spate – and so are the accusations of “unjust” profiteering, said Kalyeena Makortoff in The Guardian. Campaigners argue that banks have unfairly reaped the benefits of rising interest rates via higher mortgage rates, while failing to pass them on to savers. Last week, NatWest, which is still 44% owned by the taxpayer, reported “bumper profits” of £5.1bn in 2022 – the highest since the eve of the banking crisis in 2007. CEO Alison Rose’s total pay, meanwhile, soared by 46% to £5.2m. No wonder the Government is under pressure to act from unions and campaign groups.
Here we go again, said Matthew Lynn in The Daily Telegraph. “Almost any company with the temerity to turn a profit in Britain today” – however cyclical their business – “can expect a storm of protests and probably a hastily legislated windfall tax to boot”.
The whingers need to get over it. Banks always make more money when rates rise. But these profits made in the good times are crucial both for future investment and to reward shareholders for the risks involved in putting their capital to work. “Without that, we wouldn’t have an economy at all.”
Not everyone’s a winner this season, said Ben Martin in The Times. Barclays has slashed its bonus pool after suffering “a bigger than feared” 14% fall in pre-tax profits to £7bn. And HSBC faces its own particular pressures. The bank, which “makes most of its money in Asia”, has hiked its dividend as “an olive branch to investors” – notably the giant Chinese insurer Ping An, which is agitating for its Asian business to be spun off. Ping An’s campaign “was motivated by UK regulators banning HSBC from paying a dividend” during the pandemic, said the FT. Another crackdown is the last thing the bank needs right now.