Weakening expected in profitability of major British banks

International credit rating agency Fitch Ratings expects a weakening in the profitability of major UK banks as the benefits of high interest rates on net interest margins peak and credit impairment charges rise.

In a report published by Fitch Ratings on the subject, it was stated that major UK banks achieved strong profitability in the third quarter of this year, supported by high interest rates.

The report noted that the profitability of these banks is expected to decline slightly as the benefits of rising interest rates on banks' net interest margins (NIM) have peaked, or even begun to decline for some banks, and pointed out that credit impairment charges will also rise given the uncertain economic outlook and high interest rates.

The report recorded that the non-performing loan ratios at major banks showed a significant increase in the third quarter compared to the previous quarter, averaging 2 percent in the third quarter, and emphasized that non-performing loan ratios are expected to worsen further in 2024 as high interest rates affect consumers' ability to repay loans.

The report also predicted that deposit volumes across the sector would fall due to monetary tightening, while noting that liquidity would remain robust.

News Source: AA