KPMG comments on UK banks’ Q1 results

Ahead of Britain’s biggest lenders reporting first quarter results, research from KPMG UK shows that while banking executives are optimistic about overall business growth and profitability in the quarter, inflation, interest rates and cost pressures are the biggest challenges that could weigh on earnings and business performance.

The survey of senior banking executives* found that almost 90% are confident when it comes to overall business growth in the first quarter, supported by a buoyant outlook on expected profitability (84%).

While a majority (75%) reported a positive outlook for the UK economy in the first quarter, more than half (55%) cited inflationary pressures as the biggest challenge to their business in Q1. This was followed by interest rates (49%) and cost pressures (31%). 

Peter Rothwell, head of banking at KPMG UK, said:

“The positive tone on Q1 performance comes off the back of a strong 2023 for bank profits. But the sector may have reached a short-term profitability peak and while earnings are expected to remain broadly healthy in 2024, they are forecast to be lower than last year.

“Any delays to rate cuts should provide some support to net interest income, but the weak UK economy will likely hinder growth. Results could reflect how higher rates and the continued cost of living challenges are impacting credit quality, which has proven resilient thus far. Given the challenging environment, we can expect a continued focus on costs throughout 2024, while recent consolidation in the sector could continue.

“It will also be interesting to see the extent to which earnings have enjoyed a boost from investment banking and trading operations, in line with the first quarter results of US banks.”

ENDS

Methodology

*Online quantitative research conducted by Opinium on behalf of KPMG between 29^th November – 6^th December 2023 of 160 UK adults who are director level and above in financial services companies. This includes 95 seniors banking executives.

About KPMG UK: 

KPMG LLP, a UK limited liability partnership, operates from 20 offices across the UK with approximately 18,000 partners and staff. The UK firm recorded a revenue of £2.96 billion in the year ended 30 September 2023.  

KPMG is a global organisation of independent professional services firms providing Audit, Legal, Tax and Advisory services. It operates in 143 countries and territories with more than 273,000 partners and employees working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.