LONDON’S BUSINESS NEWSPAPER
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MONDAY 24 JULY 2023
ISSUE 4,017
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BUMPER PROFITS LIKELY TO SPARK WESTMINSTER ANGER CHRIS DORRELL THE UK’s largest banks are set to report another round of bumper profits this week amid the furore over savings rates and growing concern about the health of the UK economy. Lloyds, Natwest and Barclays are expected to report another strong set of figures for the second quarter thanks to the impact of rising interest rates. Rising rates boost banks’ net interest margin (NIM), the difference between what they pay out and receive in interest payments. Lloyds kick off earnings season on Wednesday, with Barclays following on Thursday and Natwest on Friday. Standard Chartered also report results on Friday. Analysts at UBS were bullish, predicting the results would show “better net interest income, no real bad asset formation and good capital generation”.
According to analyst consensus, Lloyds will make nearly £1.7bn in the three months to June, down from £2bn last year. Lloyds’s NIM is expected to have contracted slightly from last quarter as the bank will have paid out more to customers in interest payments. Looking forward, analysts at Bloomberg Intelligence said “NIM comments will be critical for sentiment as pressure to reprice deposits is growing”. Barclays meanwhile is predicted to rake in £1.9bn, up from £1.5bn last year, while profit at Natwest is expected to rise to £1.5bn from £1.4bn last year. The return of higher interest rates has seen banks generate some of their highest profits in years, but it has also attracted political attention. Politicians and regulators have been pouring pressure onto banks to pass on higher savings rates to customers.
Last week the big four banks offered easy access savings rates at a range between 0.9 and 1.75 per cent contrasting with the Bank of England’s base rate currently at five per cent. The Financial Conduct Authority warned banks that they must inform savers if better deals are available once the new Consumer Duty comes into force at the end of this month. The impact of rising interest rates will also put pressure on borrowers, forcing banks to set aside higher loss provisions to cope with bad loans. Despite the increase, Edward Allenby, economist at Oxford Economics, argued that banks were well positioned to weather the storm. “We think the sector is entering this period of slow-burn stress from a relatively good position,” he said. £ BOSSES TO BE QUIZZED BY MINISTER OVER FARAGE FIASCO: PAGE 3
IT’S GRIM UP NORTH...
Manchester weather ends hopes of England’s Ashes comeback
JAMES SILVER ENGLAND’S cricketers were robbed of the chance to tie up the Ashes yesterday after rain wiped out the fifth day of the Old Trafford Test in Manchester. The draw means England can only tie the series 2-2 even with a win later this week at The Oval in south
London, meaning Australia – who won the series in 2021 – will retain the famous urn. The washout of the entire fifth day and much of the fourth on Saturday has prompted calls for ‘reserve days’ to be built into the cricketing calendar to make results more likely. £ STOKES’ REACTION: PAGE 20
Octopus doubles down on offshore wind with bumper investment plan EXCLUSIVE
NICHOLAS EARL OCTOPUS Energy will team up with institutional investors to spend more than £15bn on offshore wind projects over the rest of the decade, City A.M. can reveal. The funds will be channelled
through its renewables arm, Octopus Energy Generation, and targeted at the development, construction and operation of offshore wind turbines. The cash will be sourced from both Octopus’s own resources – with the energy giant including former US vice-president Al Gore’s
Generation Investment Management among its backers – and partners like pension funds. Octopus is open to new projects across the globe, but its primary focus will be Europe, including the UK, although it has not provided
a breakdown of where the money will be spent. The company’s generation arm currently manages £6bn worth of green energy projects worldwide. Zoisa North-Bond (pictured), chief executive of
Octopus Energy Generation, said: “Offshore wind has already rapidly transformed the UK’s energy system – and we’re incredibly excited about the potential for this technology globally. We’ve got big plans to invest in even more of these big fans to help wean ourselves off polluting gas.”
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