Which banks were the winners and losers of 2023?
At the end of a year of big headlines, results and stock moves, City A.M. looks at which UK banks pressed ahead and which fell behind in 2023.
Metro Bank: Pulling back from the high street?
Metro Bank has faced significant troubles for a few years now, but 2023 has been particularly important for the high street lender.
Regulatory fines and low capital culminated in the bank announcing a major refinancing package in October to shore up its balance sheet.
The plan, which includes a £325m capital raise led by existing shareholder Spaldy Investments and £600m of debt refinancing, was overwhelmingly backed by shareholders in a vote last month.
However, the bank still has a mountain to climb, with shares cratering more than 70 per cent this year and a staggering 98 per cent over the last five years.
Investors have raised concerns over the future of the firm’s business model as, following its £925m rescue deal, the bank announced it would layoff 20 per cent of staff and look at cutting opening hours in an effort to reduce costs.
Metro Bank was founded in 2010 and quickly gained a reputation for its high street presence, with longer opening times than bigger rivals and pet-friendly branches.
Despite the overhaul, Metro Bank has reiterated its commitment to in-person banking.
It still plans to open 11 new “stores” in the north of England by 2025, even though branches are costly and run against the prevailing shift to online banking.
The bank is also under “enhanced supervision” by the City watchdog after being added to its financial crime watchlist in June.
Barclays: Job cuts, customer complaints, Qatar woes
Banks have faced a surge in complaints this year and Barclays bore the brunt of them.
The lender was the most complained about financial firm in the first half of 2023, according to the Financial Ombudsman Service.
The bank has noted that only 35 per cent of complaints against it were upheld by the ombudsman, which is below average for the sector.
Many complaints concerned poor in-person banking services. Barclays has closed or plans to close 73 per cent (787) of its 1,085 branches since 2019 – by far the most of any bank during this period – according to Which?
The Sunday Times also reported case studies of botched Isa transfers and so-called “debanking”.
A Barclays spokesperson told City A.M. that it took customer service “extremely seriously”.
“We don’t get that right every time and are determined that customers will see an improvement. Our focus is clear, we will simplify processes and improve customer experience,” they added.
Barclays shares fell as much as 4.5 per cent this month after Qatar’s sovereign wealth fund, the bank’s second largest shareholder, cut its stake in the bank by half.
The bank’s share price has halved since the Qatar Investment Authority first took a £4bn stake in 2008. It has launched a share sale for £510m.
Chief executive C.S. Venkatakrishnan is due to provide an investor update in February which will reveal more details about a major cost-cutting strategy, which could reportedly involve as many as 2,000 layoffs.
Some 1,350 roles have already been put on the chopping block this year, according to employee union Unite.
Natwest: Share slump jeopardises privatisation
Natwest holds a special place among the UK’s biggest banks as it has yet to be fully privatised.
The government acquired an 84 per cent stake in the lender, then known as Royal Bank of Scotland, during the financial crisis and has since slowly lowered its stake to around 38.7 per cent as of May.
However, the taxpayer has lost out as bank’s shares have tumbled even further below the £5 price paid by the government.
The stock has fallen below £2 in recent months as the bank’s public image suffered from a row with former Ukip leader Nigel Farage over the closure of his Coutts account.
Then chief executive Dame Alison Rose resigned in July after she admitted to discussing the Brexiteer’s Coutts account with the BBC.
The scandal prompted a wide-ranging inquiry into “debanking” by the City watchdog, as well as a surge in complaints over the issue.
News that Farage plans to sue Natwest and bring a class action lawsuit has not helped.
Despite Chancellor Jeremy Hunt’s consideration of a Tell Sid-style share sale plan for Natwest, the Treasury has insisted that it will not sell its stake for an unfair price.
The bank’s stock cratered in its biggest one-day drop since Brexit after Natwest reported weak third-quarter results at the end of October.
Honorable mention: CAB Payments – Payment processing firm CAB Payments has made waves this year for its disappointing performance. It was London’s biggest non-SPAC IPO of 2023 when it floated at a valuation of £851m in July. However, shares have not recovered from when the stock plummeted more than 70 per cent after CAB issued a profit warning in October.
HSBC: Buyback bonanza offsets China worries
Britain’s Asia-focused lenders – HSBC and Standard Chartered – have seen more positive earnings revisions than their domestically-focused counterparts this year.
HSBC’s profits more than doubled to $7.7bn in the third quarter as it reaped the benefits of high interest rates.
Following the strong performance, the bank announced a further $3bn share buyback scheme, bringing total buybacks to $7bn this year.
HSBC’s latest share buyback came after it fought off a campaign led by its biggest investor, Ping An, to split the bank’s Asia business into a separate company.
In a sign of investors’ confidence in the bank, Ping An was the only one of HSBC’s top 50 shareholders to vote in favour of a break-up.
The bank has faced major obstacles, however, due to an economic slowdown in its largest geography driven by a commercial real estate crisis.
However, chief executive Noel Quinn has repeatedly sought to reassure investors that the worst of the crisis is over and that China is very much open for business.
Shareholders appear to remain confident in the bank, and it is the only one of Britain’s Big Four lenders to see its stock rise in the year to date.
Lloyds: Weathering the rate hold storm
While shares in Lloyds Banking Group have not performed quite as well as HSBC’s, Britain’s biggest high street lender has proven more resilient than its domestically-focused rivals as the tailwind from high interest rates dies down.
The big players’ latest earnings suggested higher-for-longer rates have become a burden as fierce competition for deposits and mortgages dragged on net interest income – a key measure of profitability reflecting the difference between what banks pay out and receive in interest.
Although several others downgraded guidance in the third quarter, Lloyds left its net interest margin outlook unchanged.
The lender’s pre-tax profit came in at £1.9bn, more than triple the same period last year and slightly ahead of analyst expectations.
Lloyds set aside much less in impairment charges than expected. Its impairment charge, a measure of loan quality, was just £187m compared with £668m last year.
The bank said this figure reflected “broadly stable credit trends and resilient asset quality”, as well as an improved macroeconomic outlook.
In arguably more troubling news, Lloyds is reportedly considering a shake-up that could put more than 2,500 jobs at risk.
Starling and Monzo: Challenger banks steam ahead
Digital challenger banks including Starling and Monzo have had a bumper year as they become an increasingly serious threat to the more well-established firms.
Both banks leapt ahead of their high street rivals in an official ranking of UK lenders’ personal and business banking services by the Competition and Markets Authority published in August.
Starling was hit by the sudden departure of trailblazing Anne Boden, the first woman to found a British bank, as chief executive in June. She cited a desire to split up her role as a major shareholder and the CEO, while the Financial Times reported that her decision followed a row with investors over Starling’s valuation falling by at least £1bn when fund manager Jupiter sold its holding.
Nevertheless, the firm in May reported record pre-tax profits of £195m for the year to the end of March 2023, a more than six-fold increase from the same period last year.
Starling’s revenues doubled to £216m, while its loan book grew nearly 50 per cent to £4.9bn.
Its software-as-a-service subsidiary recently made inaugural deals to broaden the bank’s international footprint as some investors bet on Engine to drive up Starling’s valuation ahead of a hotly-anticipated IPO.
Monzo is also expected to pursue a big-ticket public listing, while boss TS Anil eyes up a “huge gap” in the US market.
He said earlier this month that the firm had “earned the right to dream bigger” and was also looking at expanding into Europe.
Alphabet, the parent company of Google, is reportedly close to a deal with Monzo to lead a funding round of up to £500m.
The agreement could value the neobank at more than £4bn, it is understood.