UK Banks: Solid Results in FY22 in Spite of Higher Loan Loss Provisions
DBRS Morningstar has released a commentary discussing large UK banks’ 2022 earnings, covering HSBC Holdings plc, Barclays PLC, Lloyds Banking Group plc and NatWest Group plc.Key highlights:
• Overall, the large UK banks reported solid results in FY22 largely driven by a significant increase in net interest income (NII) reflecting the impact of higher rates, temporary pricing lags, as well as growth in the mortgage and commercial lending books.
• At the same time, the uncertain economic environment and high inflation resulted in higher loan loss provisions. Asset quality started to show signs of deterioration although Stage 3 loan ratios remained low.
• We consider the large UK banks’ capital position is robust. Capital cushions above minimum requirements have reduced since the pandemic following an increase in RWAs, share buybacks and dividends, but generally remain solid.
• Despite the current market volatility affecting the financial sector globally following the failure of SVB, we consider the large UK banks are well placed in terms of asset and liability management and that the acquisition of SVB UK by HSBC is a small and manageable acquisition.
“We expect the contribution of net interest income to revenues will remain robust in 2023,” said Vitaline Yeterian, Senior Vice President, Global FIG at DBRS Morningstar. “However, the UK economy is facing a downturn. Therefore, we will continue to monitor any deterioration in the banks’ asset quality.”
Barclays is a holding company. Through its subsidiaries, Co. is a financial services provider engaged in retail banking, credit cards, wholesale banking, investment banking, wealth management and investment management services. Co.'s business segments are: Barclays U.K, which provides everyday products and services to retail customers and small to medium sized enterprises; Barclays International, which delivers products and services designed for Co.'s corporate, wholesale and international banking clients; and Head Office, which comprises head office and central support functions (including treasury) and businesses in transition.
HSBC Holdings is a financial services holding company. Through its subsidiaries, Co. operates four businesses: Retail Banking and Wealth Management, which serves customers through four businesses: Retail Banking, Wealth Management, Asset Management, and Insurance; Commercial Banking, which provides working capital, term loans, payment services, and international trade facilitation; Global Banking and Markets, which delivers a range of transaction banking, financing, advisory, capital markets, and risk management services; and Global Private Banking, which provides a range of private banking services. At Dec 31 2017, Co. had total assets of US$2.52 trillion and deposits of US$69.92 trillion.
Lloyds Banking Group is a financial services provider. Co.'s main business activities are retail and commercial banking, general insurance and long-term savings. Co.'s Lending products are mortgages, credit cards, personal and business loans; Deposit products include taking Current accounts and savings accounts; Insurance products are home insurance, motor insurance and protection; Commercial financing products includes term lending, debt capital markets and private equity; and Risk management products includes interest rate hedging, currency and liquidity. As of Dec 31 2017, Co. had total assets of £812.1 million and total deposits of £448.0 million.
DBRS Morningstar is a global credit ratings business with 700 employees in eight offices globally. DBRS and Morningstar Credit Ratings are committed to empowering investor success, serving the market through leading-edge technology and raising the bar for the industry.
Together, we are the world’s fourth largest credit ratings agency and a market leader in Canada, the U.S. and Europe in multiple asset classes. We rate more than 2,600 issuers and 54,000 securities worldwide and are driven to bring more clarity, diversity and responsiveness to the ratings process. Our approach and size provide the agility to respond to customers’ needs, while being large enough to provide the necessary expertise and resources. For more details visit us at dbrs.com.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.