Brexit bonus: British banks beat French competitors for the first time since 2015

Britain’s financial sector has “getting started” on Brexit, sources said last night, after figures showed that Britain’s big banks outperformed their French counterparts last year for the first time since 2015.

Data compiled by The Banker magazine showed that the UK’s top lenders – dominated by the big six HSBC, Barclays, Lloyds Banking Group, Standard Chartered, NatWest and Nationwide – reported profits totaling £45.4 billion in 2021.

They outperformed France’s top banks, whose net income totaled £45 billion. Germany was even further behind at £11.4 billion.

Profits up: HSBC, Barclays, Lloyds Banking Group, Standard Chartered, NatWest and Nationwide all reported profits totaling £45.4bn in 2021, while France’s top banks earned £45bn

Six years ago, Britain’s vote to leave the European Union had sparked fears of a bank exodus – and prompted continental financial centres, including Paris and Frankfurt, to step up efforts to lure sections of the industry out of the city.

That does not appear to have materialized and although analysts warned that some one-off factors flattered UK banks’ earnings last year, the numbers have been used to back up the fears.

Conservative MP Anthony Browne, former head of the banking industry lobby group and a member of the Treasury Department’s selection committee, said: “The city is the world’s leading financial center and has weathered Brexit with ease.

Predictions that Brexit would lead to the city’s demise have been proven wrong.

“Far from dying away outside the EU, the city shows remarkable vitality.”

The numbers also showed that UK banks were delivering better total returns – a measure of profitability – than the European average.

HSBC remains the only European bank in the global top ten for the eleventh consecutive year – in ninth place.

The remainder of the top ten by core equity investments are made up of Chinese and US lenders.

The figures also showed that after a slump in profitability in 2020, the UK banking sector had rebounded last year with pre-tax profits up 200 per cent.

But much of the rebound came as lenders were able to reclaim billions that had been set aside early in the pandemic amid fears lockdowns could lead to mass unemployment and a housing slump.

Those provisions had dampened gains in 2020.

But after the government stepped in with furlough support, the banks’ worst fears did not materialize and they were able to withdraw those sums, flattering profits the following year.

France has tried to lure London bankers with tricks that reportedly include language classes for them and their families.

A “Choose France” effort by President Emmanuel Macron that rolled out the red carpet for global investment banks was partially successful as JP Morgan, Goldman Sachs, Morgan Stanley and Bank of America increased their presence in Paris in recent years. But things didn’t always go smoothly.

Last year it was reported that when JP Morgan asked 15 traders to move to Paris, almost half chose to quit instead.

Figures released earlier this year by auditor EY showed the number of Brexit-related transfers to the EU was 7,000, described as “significantly lower” than the peak of 12,500 estimated in 2016, when “Project Fear” was in full swing.

Gary Greenwood, an analyst at Shore Capital, said UK banks are in “much better shape” than they were at the time of the financial crisis – holding more capital to protect against future shocks and being discouraged by stricter regulations from being the riskiest engage in lending behavior.

A source of post-Brexit tension has been the use of London to clear trillions of euros in derivatives transactions.

In January, the EU extended permits for banks to use the city for clearing until 2025, while stepping up efforts to end its “over-reliance” on the UK for the service. Hargreaves Lansdown’s Susannah Streeter said this had allayed concerns in the industry.

Lenders in Europe, meanwhile, have been weighed down by various issues, such as France’s BNP Paribas exposure to sanctions-hit Russia.

And the European Central Bank has been “behind the curve” in raising interest rates, which have already risen in the UK and US, Streeter said.

Russ Mold, Investment Director at AJ Bell, said: “There does not appear to have been any mass movement of personnel, resources, trade flows or fees overseas, at least not as much as Paris or Amsterdam or Dublin or Frankfurt would have hoped in the wake of the Brexit vote.”

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Brexit bonus: British banks beat French competitors for the first time since 2015

Source link Brexit bonus: British banks beat French competitors for the first time since 2015

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