UK banks face a sensitive problem: fatter profits from rising rates
Be careful what you wish for. Since the great financial crisis, UK banks have mostly made returns below their cost of capital. The culprit has been low interest rates. Chief executives talked about rising rates in the wistful tones of Mr Micawber hoping something would turn up.
Now higher rates are bringing fat returns to lenders such as Lloyds, NatWest, Barclays and HSBC, as margins over deposit payouts widen.
But the rebound has been so large and fast that it has created another problem for them. Profits are at last burgeoning again, as quarterly results next week should show. But the bonanza will coincide with serious financial stress for some mortgage borrowers.
This story originally appeared on: Financial Times - Author:Jonathan Guthrie
