Big UK banks’ profits have slid by more than half over the last year, according to a ranking of the world’s largest lenders published today.
UK lenders included in The Banker’s top 1,000 World Banks 2021 experienced a 53 per cent drop in profits.
Losses were attributed to the severe damage the pandemic has inflicted on the UK economy and Brexit uncertainty.
The ranking is based on Tier 1 capital, a key measure of banking strength.
Joy Macknight, editor of The Banker, said: “The UK banking industry has faced significant headwinds over the course of the past year, with the impacts of the Covid-19 pandemic and Brexit uncertainty weighing profitability down.”
HSBC sole European bank in top 10
HSBC is the only European bank to rank in the global top 10 list for the tenth successive year.
The top five ranking UK banks all saw pre-tax profits drop sharply over the last year.
HSBC lost 34.2 per cent, while Barclays’s pre-tax profits slid 28.72 per cent.
Lloyds Banking Group absorbed the harshest hit to pre-tax profits of the top five UK banks, down 71.72 per cent.
Standard Charter lost 56.56 per cent and NatWest Group shifted from profit to loss.
Global banking powerhouses shake off pandemic pressures
The rankings show the world’s largest banks have remained resilient in the face of the pandemic-induced economic decline.
The world’s largest lenders added 12.7 per cent to their collective Tier 1 capital, reaching $9.9trn, a record high.
Total assets rose 16 per cent, to $148.6trn, while deposits grew 17.1 per cent, to $93.9trn.
Macknight added: “Although profits have shrunk across the globe and many banks’ balance sheets are loaded with allowances for expected loan losses, the world’s banking industry has held up remarkably well and is better capitalised than ever before.”
The banking sector has also performed better during the pandemic compared to the financial crisis.
The top 1000 banks’ combined profits fell 19.2 per cent year-on-year, significantly lower than the 85.3 drop per cent in 2009.
European banks suffer from low rates
Poor economic growth and a record low interest rate environment put downward pressure on Western European banks’ profitability.
Of the largest European economies, banks’ aggregate pre-tax profits contracted 43.71 per cent in Germany, 75.72 per cent in Italy and 47.67 per cent in the Netherlands, while France fell 11.61 per cent.
Spain notched negative pre-tax profits, driven by two of its largest banks, Banco Santander and Bankia, moving from profit to loss.
China now holds almost double the volume of Tier 1 Capital ($2.96trn) as the US ($1.58trn), despite having fewer banks than the US in the rankings.
Profits grew 5.2 per cent in China, compared to a 31.5 per cent and 41.8 per cent drop in the US and Western Europe respectively.