All three banks, Natwest, Lloyds and Barclays are set for huge profit drops

The rising costs of staff are also a concern. This week’s report by Goldman on UK bankers receiving £350,000 in bonuses highlights the problem.

Next week, Britain’s banks will report their first-quarter results. The mood is less celebratory than last year’s bumper numbers. There are big profit drops forecast.

The lag in adjusting mortgage rates and loans and savings is a hindrance to rising interest rates. However, other issues are growing, including the squeeze on household spending and rising insolvencies.

The cost of staff is also increasing. This week’s report by Goldman UK Bankers on UK bankers receiving £350,000 in bonuses highlights the pressure. However, this will impact Barclays and HSBC less than the more domestic-oriented Lloyds and NatWest.

HSBC will get the ball rolling Tuesday 26 April, and UBS anticipates soft wealth management revenues in light of recent Covid restrictions in Hong Kong.

While the pivot to Asia and away from Europe and the UK is a constant theme, costs will be a major concern.

The consensus forecasts are for profits of US$3.72bn. This is down 36% from a year ago.

Shore Capital says Barclays (Thursday 28 April) is their pick, though this may be due to recent share price weakness.

This is due to concerns about its exposure to investment banking. The consensus expects first-quarter profits of around £1.32bn. This is down 45%.

When Lloyds (Wednesday 27th April) and NatWest’s (Friday 29 April), update, mortgage demand will be at the forefront of attention.

Both will be able to benefit from higher interest rates, but the competition for UK mortgages is fierce and the concerns over the domestic economy will soon reflect in loan demand.

The consensus is that Lloyds will announce first-quarter profits of £1.43bn. This is down 25%. NatWest’s profit will be around £873mln.

Shore Cap says that you shouldn’t expect much news about hand-outs. It is the annual and half-year statements where the banks make big payout announcements.

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