Lates News

The focus of the third-quarter earnings reports of major UK banks was not the bank tax, rising interest rates, inflation or artificial intelligence, but deposit competition. UBS analyst Jason Napier said on Lloyds Banking Group's earnings call that deposits had become "the number one issue for investors." Other analysts even apologized for repeatedly asking about deposits. The banks' earnings reports highlighted the intensity of deposit competition. In the three months to September 30, Lloyds' UK retail savings deposits fell by 300 million (about $403 million). Deposits at NatWest Group's private banking and wealth management business also fell by a similar amount. Barclays' UK corporate bank deposits fell by 2 billion from the previous quarter. HSBC Holdings said one of its key profitability metrics remained stable, but emerging competitive pressure on customer deposits in markets such as the UK offset some of the positive impact. Deposits are a source of funding for banks that is cheaper than the wholesale funding market. Wholesale funding refers to banks borrowing from channels such as institutional investors. Banks use deposits to make loans and earn income from them. Shrinking deposit levels mean banks must either reduce lending or bear higher funding costs.