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The writer is the author of several books about the city and Wall Street
“Busy doing nothing, doing all day.” Although better known as Krooner than bank sages, Bing Crosby’s Standard of 1949 functioned well for retail bank in the UK last year. Avoiding the main mistakes, riding the interest rate cycle and working hard on what they know best, BIG three listed high street banks, Lloyds, Barclays and Natwest, and recently reported strong annual results, returned over £ 10 billion to dividend and redemption shareholders.
The shares of the shares of all three banks increased, partially closing the unpleasant discount on the bookkeeping value, reducing capital costs and reducing vulnerability to activists.
“Doing nothing,” of course, implies difficulty in running a bank. These are part -time companies. Annual reports on a large three British banks are an average of over 400 pages with a dizzying series of mutual financial instruments that cover millions of digital and face to face. The potential for error, human or otherwise is huge. The incentives of employees are high, transparency is low, and the industry culture, say, is ongoing.
Navigation about this is a achievement in itself and as the stainful history of the industry shows, it cannot be understood for granted. Three cheerleaders, then, are certainly locked for a good year.
But there is no time for complacency. Last year, the UK’s basic rates hovered about 5 percent of a sweet spot, giving simple net interest – a difference between the raised interest rates and the rates paid for deposits – the juice of the managed derivatives with low risk. This lies the danger. In the midst of the investor, the temptation could be that the committees think that they are ingenious and forget that the business environment has done much of a heavy lifting.
Hubris is not very rare in banking. In 2006, on their back conditions, HBOs and Northern Rock increased their share of the mortgage market, exaggerating their own balance sheets. Next year, convinced that the Scala is the key to global success, Barclays and RBS have entered the fierce battle for the rival Dutch Bank ABN Amro. Excessive confidence was replaced by an analysis of clear heads. The consequences, as we know now, were catastrophic.
What are the risks of another lush burgen outburst? The trigger points are never identical, but there are three things to look out for.
First, self-talented wounds. British banks are subject to Gafe. Barclays’ a plaid history It means that in 2022 he was forced into a expensive settlement when he had to recognize the excessive issuance of regulated securities. 2023, then executive director Natwest Dame Alison Rose forced to leave After appointing Nigel Farage in an interview with Debanking. Car loans The case for the wrong sales Currently, passing through the courts in the UK could be shown expensive, especially for Lloyds on the market.
Second, lower credit standards. Low loan damage was a factor in the results of 2024 and although there are no current prospects for a sudden increase, this should not be taken for granted. Geopolitical volatility is an obvious threat, but also a government encouragement to provide more in support of its growth strategy. Banking is contrary to most industries, in which more volume absorbs overhead and increases margins. In banking, this usually means more borrowing and higher risk.
High Street banks are no longer dealing with market stakes, such as those between Barclays and Natwest in 1990. “Number one from ’91” proclaimed the first, and “Poo according to ’92” answered the latter wit. But government pressure for growth financing, for example, in the living space, carries a similar risk.
Third, diversification. By establishing a platform of credibility, diversification through acquisition is now an option, at least in theory.
However, with their basic banking business in the UK, they recently spread through medium acquisitions-Barclays and Natwest bought Tescoves and Sainsbury’s banking companies-Coating another large retail bank looks like an exaggerated concentration.
Growth in less regulated activities, for example, private banking and property management, is probably more interesting. But although no company can stand peacefully, adding a new activity that requires a different set of skills, and complex technology has the risk of integration and stretching management.
Committees love to do things, and the main executives like to leave the legacy. But all three British street banks have already clearly articulated plans for organic growth. They should stick to them and follow the next Crosby classic line “trying to find a lot of things I can’t do.”
