LONDON (CU)_British banks which registered bumper profits last year took them as a sign of better things to come in 2022. With the pandemic waning, the new year was meant to mark a return to normal, with interest rates rising from record lows and international travel rebounding after border closures were lifted. However, this hopes for a return to normal is expected to absent from this week’s UK lenders’ results as optimism among bank bosses darken.
Just a year ago, Jes Staley, the chief executive of Barclays at the time, was particularly optimistic, saying the UK was on course for its biggest economic boom since 1948, adding that the robust economic recovery in 2021 will be carries through into 2022. However, this was before Russia’s invasion of Ukraine in February this year, which rattled global markets and exacerbating already-soaring costs for consumers by jeopardising energy supplies.
The broader effects of geopolitical tensions and rising inflation are being felt across the globe, according to experts. This would mean that some banks which released loan loss provisions worth billions of pounds last year, will be forced to start clawing bank that cash to cover loans they believe could be in trouble. This would dampen earnings and growth forecasts of the country’s biggest lenders, including Lloyds, HSBC, NatWest and Barclays, all of which are expected to release their results for the first quarter over the coming week.
According to analysts, Barclays is expected to hike funds set aside for potential defaults to £299 million, from £55 million last year. This would result in a decline of the firm’s profits by about 45 per cent. Similarly, HSBC is also expected to see its pre-tax profits drop by more than one third, as the multinational investment bank is likely put aside $934 million (£715 million) to protect itself against potential defaults in the first quarter, compared with the $435 million at the start of last year.
