Achi news desk-
Yet Bank of Scotland owner Lloyds is expected to report a significant £600m drop in profits when it posts its results on Wednesday, while Barclays is expected to follow suit on Thursday with a £400m drop. NatWest, the owner of the Royal Bank of Scotland, has been hit with a £600m shortfall when it reports on Friday.
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At first glance, these expectations from the City’s experts are completely at odds with KPMG’s findings, but they dig a little deeper and it starts to make some sense.
First of all, those concerns about interest rates will have subsided somewhat following news earlier this week that, although headline inflation has fallen, wage inflation has remained higher than the Bank of England would like. This means that the Bank is less likely to cut the cost of borrowing as quickly or as early as expected.
While many consumers and businesses look forward to a fall in interest rates, higher base rates support commercial banks’ profit margins by widening the gap between the lower interest amounts they pay savers and the higher interest charged to customers.
READ MORE: Interest rate cut hopes pushed back after slower-than-expected fall in inflation
Secondly, the drop in profitability needs to be put into perspective. 2023 was a monumental year for the banking industry as borrowing costs skyrocketed, setting a high bar for year-on-year comparisons in 2024.
So although it is short of last year’s first quarter figures, Lloyds is still expected to report a profit of £1.7 billion, Barclays £2.2bn, and NatWest £1.2bn. That’s enough reasons to see the glass as half full.
