LONDON - Britain’s big four banks amassed more than 200 billion pounds of new deposits last year as customers reined in spending through pandemic lockdowns, far outstripping extra lending to struggling businesses and households.
The banks now face a glut in savings, a Reuters analysis of the banks’ results show, as domestic customers of the four lenders deposited 221 billion pounds of extra cash. More deposits help shore up bank finances, but are not necessarily good news for lenders when central bank interest rates are near zero, making it hard to lend profitably.
The crunch in consumer credit therefore severely dented lender income, compounded by the fact the Bank of England cut benchmark rates to an all-time low of 0.1%. Barclays bucked the trend entirely, with income overall edging up 1% thanks to a stellar year for its investment bank in pandemic-driven volatile markets that offset woes in retail.The big unknown for the banks remains how severe a hit the crisis will deal to their loan books, once government stimulus packages to support consumers and businesses are phased out.
Despite the torrid economic backdrop, the provisions in the last two quarters were back to pre-crisis levels at at least some of the banks - a reflection of the impact of ongoing government stimulus.
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