Peter Rothwell, Head of Banking at KPMG in the UK, comments:
“The results paint a mixed picture for the banks. Despite steady third quarter profits, buoyed by the higher interest rate environment, some lenders are expecting margins to come under pressure moving forward. While there is evidence of higher interest rates and the cost-of-living crisis having an impact on some credit portfolios, so far there hasn’t been a significant deterioration in asset quality. However, the current environment is having some impact on strategy and capital allocation decisions, as banks adjust to the economic headwinds and ongoing regulatory change.
Against this challenging backdrop, it’s not surprising to see a growing emphasis on cost cutting. We expect to see banks continue to focus on the use of technology, including AI, to deliver efficiencies and enhanced customer experience while building resilience and driving down costs in areas such as regulatory compliance.
The market will be watching to see how the higher interest rate environment will impact the banks over the coming quarters, both in terms of net interest margin and signs of further deterioration in credit quality."
