UK banks’ profits surge past French rivals for first time since before Brexit vote

Profits at Britain’s banks have topped their French counterparts for the first time since before the Brexit vote, reveals a fresh study published today.

The UK’s largest lenders posted pre-tax profits of $55.1bn (£45.6bn) last year, slightly higher than the $54.8bn (£45.3bn) registered by French banks, according to The Banker’s annual top 1,000 world bank ranking.

This is the first time since 2015 that UK banks have beaten their French competitors.

The research reveals the UK banking sector is rebounding strongly from the Covid-19 crisis and is powering forward despite concern Brexit could hit its competitiveness.

Britain’s lenders also beat Germany’s banks, which includes investment banking giant Deutsche Bank, by a margin of over $40bn (£33bn)

Asia-focused HSBC was the UK’s best performing bank, coming ninth in the world, remaining the only European lender in The Banker’s top 10 for an 11th year in a row.

However, HSBC may drop down the rankings in future years if Chinese insurer and one of its largest shareholders Ping An succeeds in its push to spin out the bank’s Asian business.

Most of Britain’s high street lenders came in the top 100. Barclays finished 24th, Lloyds came 42nd and NatWest ranked 53rd.

Lloyds registered the largest surge in profits of all the UK banks, raking in a near six fold increase. 

Banks’ bottom lines were hit hard by them having to set aside billions of pounds of reserves to deal with an expected wave of defaults caused by the pandemic. 

The UK sector’s overall profits rose over 200 per cent over the last year, The Banker said, but the upsurge was mainly driven by the release of Covid-19 reserves.

“Much of the boost can be attributed to a reduction or reversal in last year’s credit impairment charges for expected loan losses that didn’t materialise, like most lenders across the world,” Joy Macknight, editor of The Banker, said.

The global banking system has never been more robust than it is now. For the first time since The Banker’s rankings started, tier 1 capital, a measure of banking strength, at the world’s biggest banks topped $10 trillion.

China’s state-owned Industrial and Commercial Bank of China topped the table, followed by three more Chinese lenders. 

Wall Street titans JP Morgan, Bank of America and Citigroup came fifth, six and seventh respectively. Goldman Sachs finished 17th.