United Kingdom banks face savings glut on road to covid-19 pandemic recovery. UK Banks
Britain’s big four banks amassed more than 200 billion pounds ($277.52 billion) of new deposits last year as customers reined in spending through pandemic lockdowns, far outstripping extra lending to struggling businesses and households.
Full-year earnings reported by HSBC, Barclays, Lloyds and NatWest last month revealed the extent to which lenders’ finances have been upended by the crisis.
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.
By contrast, despite banks doling out billions of pounds of state-guaranteed finance to companies since the pandemic hit, their net lending growth in the UK overall was 53.4 billion pounds – a quarter of the growth in deposits.
The more limited lending growth can be explained by a fall in appetite for some lending, particularly consumer credit, where separate Bank of England data has shown Britons paid back 13.8 billion pounds in the last year.
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.
That explains the heavy focus on wealth management in banks’ strategy updates last month, as they race to earn more from fees to compensate for low lending margins.
Banks have said they expect a customer spending splurge as Britain comes out of its latest lockdown in the coming months, which may go some way to eating into the deposits pile.