UK Top 5 Banks – Financial Summary for H1 / Q2 2020

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Overview of the top 5 UK banks’ H1 2020 performance and it is clear that whilst the bank’s are returning to profitability, challenging times lie ahead with all incumbents making accounting adjustments in order to recognise potential future losses linked to COVID-19.

NatWest Group

Alison Rose made it clear that COVID-19 has affected the government-owned bank’s H1 / Q2 results with the following comments:

“Our performance in the first half of the year has been significantly impacted by the challenges and uncertainty our economy continues to face as a result of COVID-19, however, the NatWest Group has a robust capital position, underpinned by a resilient, capital generative and well diversified business.”

There are two interesting takeaways from the results:

1. The bank continues to make money

Bear in mind that NatWest have recognised an impairment charge for Q2 2020 of £2bn to deal with future losses, including loans that may default due to the fall-out of COVID-19. Whilst this is a sensible approach supported by the UK banking regulators, the operating profit for H1 was £2.1bn which is up 3% on H1 2019’s results.

2. Will COVID-19 reshape the bank’s UK-centric strategy?

The bank does currently have diversified UK & Irish banking franchises catering for clients in retail, wealth, business and large corporates, however the newly renamed NatWest Group does not have a material European nor global presence like its competitors, which gives the bank significant exposure to the fallout of the pandemic and the subsequent impact on the UK economy. With the recent confirmation that the UK entered a recession due to its COVID-related restrictions, Brexit on the horizon and the UK government’s review of wealth taxation, Alison Rose and her team may need to re-consider the UK-centric strategy that was key to her predecessor’s success in turning the bank around post the 2008 crisis.

For further reading, go to the NatWest Group Investors page:

Lloyds Banking Group

CEO Antonio Horta-Osorio’s H1/ Q2 sentiments focused on the economic hardship facing the UK economy: “We have seen the UK economy deteriorate since the first quarter.”

The Lloyds CEO announced that the bank is setting an extra £2.4bn aside for bad loans and further indicated this may increase to £5.5bn by the end of the financial year. Looking behind the numbers, if you remove the provisions for impairments, then net income is £7.4bn which is a 16% drop on the same period in 2019.

Two items that stood out from the results announcement:

1. Lloyds has spent a very large £2.6bn on strategic initiatives

The next 12 months will be crucial to the Lloyds Group as it hopes to realise some of the benefits of £2.6bn invested in strategic initiatives that include digital transformation.

2. Who is going to be the next CEO?

Current CEO Antonio Horta-Osorio is stepping down in June 2021 but not much was given away on the approach to succession planning and what progress has been made.

A lot of change for an organisation often viewed as ‘steady and reliable’ by investors.

For further reading, go to the Lloyds Investors & Performance page:

Santander UK

The announcement from Nathan Bostock outlined that Santander has the resilience to weather the COVID-19 storm and its key focus is on supporting people and businesses at this time: “With strong foundations and a resilient balance sheet, we remain fully committed to our purpose – to help people and businesses prosper.” If you read the full press release, Bostock indicated the future poses some key challenges for Santander such as the impacts of the lockdown and Brexit on the UK economy.

Key areas that stood out:

1. Profit before tax is £147m, down 74% and similar to its peers includes impairments which stands at £376m

2. Income on overdraft and current products has been impacted by base rate reductions, however loan write-offs remain low due to Santander’s focus on low-risk lending

3. A new Chairman joins from November, William Vereker, who has spent time at Lehmans, UBS, Morgan Stanley and as the UK government’s ‘Brexit Business Envoy’ in 2018. Considering Bostock led the clean-up of the RBS ‘bad bank’ in the immediate aftermath of the 2008 global financial crisis, Santander seems to be ensuring the bank has seasoned leaders steering the bank through the uncertain times that lie ahead.

For further reading, go to the Santander UK Investor Relations page:


HSBC Group Chief Executive, Noel Quinn offered the following summary: “We are helping our customers navigate their own path through uncertainty and acting with pace and decisiveness to adapt HSBC to an environment in which no business can afford to stand still.”

The key performance indicators (in USD):

Reported revenue for H1 2020 was $26.7bn, whilst profit before tax dropped 65% to $4.3bn due to expected credit losses and impairments of $6.9bn. Costs seem to be coming under control, being down 7% YoY at $7.3bn for the quarter.

The CEO’s summary statement lacked some of the key underlying themes and challenges that HSBC is currently navigating through, namely:

Dependency on Asia – majority of profits are from Asia whilst US & Europe continue to be lagging behind and are weighing heavy on the cost base.
COVID-19 – this receives a very brief mention which is surprising considering the US & Europe have taken the biggest economic hit globally so likely to only add to the challenge of reviving business in these regions.
Global risks – The ongoing situation in Hong Kong fuelled by Chino-US tensions; the very threat of a no-deal Brexit and negative interest rates in the Eurozone do not provide a comforting economic outlook for the current business model.

For further reading, go to the HSBC Investor Relations page:


Jes Staley, Barclays CEO, included a summary of the bank’s participation in the UK government’s COVID-19 lending schemes: “…we have helped to deliver around £22bn of vitally important COVID-19 government support measures to UK businesses to help fund them, including c.250k government-backed Bounce Back Loans totalling c.£7.7bn, c.£2.5bn under the CBILS programmes and c.£11.7bn of commercial paper issuance.”

The financial performance made positive reading, Barclays investment bank is benefiting from market uncertainty. Total group income is £11.6bn and profit before tax is £5bn, however post impairments of £3.7bn for the period brings the number down to £1.3bn.

1. The bulk of the income came from the Corporate and Investment Bank, which was up 31% at £6.9bn

2. The consumer and UK focused businesses both experienced income reductions

3. Group costs were reduced by 4% over the same period in 2019

4. Circa 80% of staff are working from home

Looking ahead, alongside managing the fallout from the COVID-19 global pandemic, Barclays is currently facing a number of legal and regulatory investigations, most notable of which is connected with the capital raising during the 2008 global financial crisis. Contingent liabilities remain largely unchanged YoY at £22.9bn.

For further reading, go to the Barclays Investor Relations page:

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