UK Big Four Face Soaring Fines and Interest Rates in 2023
The 2022 Performance of the U.K.’s ‘Big Four’ Banks
The “Big Four” banks in the United Kingdom – Barclays, HSBC, Lloyds, and NatWest – have had a challenging year in 2022. This report looks at the performance of these four banks in the year and provides an analysis of the financial results of each.
Barclays started 2023 on a rough note, announcing a 15% year-over-year (YoY) drop in profit to $7.2 billion in 2022. This was partly due to about $1.9 billion in litigation costs and fines last year. Most notable among those charges was the over-issuance of U.S. securities to $17.6 billion, which resulted in a $361 million penalty paid to the Securities and Exchange Commission (SEC). Additionally, Barclays was required to buy back oversold securities in the U.S. to the tune of £1.3 billion and pay SEC-imposed penalties amounting to an estimated £165 million during the same period. The financial institution was also slapped with a $200 million fine about a U.S. regulatory investigation into the noncompliant use of messaging groups like WhatsApp.
HSBC’s profit before tax fell by just $1.4 billion to $17.5 billion in 2022, while its revenue for last year increased by 4% to $51.7 billion. The FI attributed the significant profit jump to “strong reported revenue growth and lower reported operating expenses.” However, customer lending balances fell by $121 billion on the downside. At the same time, assets held for the planned sale of its retail banking operations in France and banking business in Canada also ran into a double-digit billion range. Despite this, the lender said its outlook remains positive as it pinned its hopes on higher interest rates to keep profits up this year, with net interest income projected to hit at least $36 billion in 2023.
NatWest reported a profit of £5.1 billion (about $6.1 billion) in 2022, up from £3.8 billion (about $4.6 billion) the year prior. The bank said that it believes that interest rates in the country have peaked and expects the Bank of England base rate to peak at 4% in Q1 this year before it starts dropping around the first and second quarters of 2024. To meet its 2022 “purpose-led” objectives, the bank said it engaged in “expense and investment discipline,” which led to about a 3% reduction in yearly cost while investing £1 billion pounds — an annual target between 2021 and 2023 — in its digital transformation.
- Barclays was fined $361 million by the SEC due to the over-issuance of U.S. securities.
- HSBC’s customer lending balances fell by $121 billion in 2022.
- NatWest believes that interest rates in the country have reached their peak.
The “Big Four” banks in the United Kingdom had a difficult year in 2022, with Barclays, HSBC, Lloyds, and NatWest all reporting profit declines. However, these banks remain optimistic about the future and invest in digital transformation to remain competitive.
The “Big Four” banks in the United Kingdom experienced a challenging year in 2022, with all four banks reporting declining profits. Despite this, these banks remain optimistic about the future and invest in digital transformation to remain competitive.