This month we got a chance to assess the real impact of 2020 on the sector. It also signalled the roadmap to ease lockdown restrictions, and with it the potential for the economy to bounce back. Here are the headlines that the Banking team at PEN have been discussing.
- February saw 2020 results issued, most of which expectedly reported a fall in profits (see Barclays, HSBC, Lloyds) or a loss for the year (see Natwest, Santander) – although in most cases, non-performing loans and credit / debit debt didn’t materialise as significantly as the provisions set aside had planned for.
- The reaction has been largely the same – expect further cost cutting by various means; lower operating costs, reduced office space, close down sections of the business, relocate and in some cases reduced investment in the UK market.
- As an aside, there has been a wide variety of responses to the workplace challenge posed by COVID, from those aiming to return to how they were (see Goldman Sachs) through the likes of LBG and HSBC (as stated in their results) where they will increase remote working to drive cost reduction and companies like Revolut who are strategically changing the way they work.
- The results season also saw the resumption of dividends payments. Since the pandemic, the regulator has halted pay-outs to shareholders to protect against loan losses, enabling this again in December with some limitations to distributions to stakeholders.
- This is an indication of the banks coming out of 2020 in a better position than a lot may have first predicted and a cause for optimism (albeit cautious) in 2021.
- ESG and green finance is gathering momentum in banking, something we predicted would be high on the agenda in the sector this year.
- The government announced funding for a finance research hub to support financial institutions by encouraging greener investments and supporting business decisions by providing data and insights.
- We also saw the Bank of England show support for a proposal to establish a new sustainability reporting standard-setting body, citing sector benefits such as monitoring financial risks from climate change and transitioning to a low-carbon economy.
- It is clear climate change is high on the consumer agenda, something banks such as Tandem are using to lure customers (particularly while savings account interest rates are so low) and new challengers such as Ashman Finance leading on an ESG line.
- If you would like to discuss any ESG topics or any of our market research on ESG, please don’t hesitate to contact us.
And in case you missed it...
- The Bank of England gave its strongest indication to expect negative interest rates by telling banks and building societies to prepare sufficiently in the event that it does happen.
- More current account providers are offering current account switching incentives again, following a reduction in switches in 2020. With 2020 forcing customers online for banking services, we expect the number of switches will increase again with more digitally savvy consumers looking for the most attractive proposition.
- The CMA personal banking service quality results revealed digital only banks taking the top 3 places.
- And one of the headline casualties of the 2008 Financial Crisis finally completed its journey back to the private sector.
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