Eurozone economies may be in the doldrums but the biggest banks across the Continent, in line with their British counterparts, are living high off the hog. Normalised interest rates are boosting income and earnings.
Without having to work extra hard, Lloyds here in the UK, Spain’s Santander and even sub-octane Deutsche Bank are delivering.
In spite of a low-growth British economy and recession in Germany, bad debts are under control for the moment.
Moreover, bankers based in the City have something to celebrate.
The Bank of England has taken advantage of Brexit freedoms by removing the EU imposed cap on bankers’ bonuses.
Normalised interest rates are boosting bank’s income and earnings
Not much of Liz Truss’s ill-fated stewardship of Britain remains intact but this is one proposal not reversed by Jeremy Hunt. The banks are racking up billions in profits: Lloyds made £4.3bn in the past nine months. So the political timing is not ideal.
This is especially true when much of the country is living with an inflation shock and another winter ahead with elevated energy bills. If ever there was a moment when compliant remuneration committees at Britain’s high street banks have a responsibility to curb excess, it is now.
NatWest, in particular, must claw back some of the £11m payout to ousted chief executive Dame Alison Rose who handled Nigel Farage’s cancelled account at Coutts so poorly. The optics of lifting the bonus ceiling may look bad but it is critical if Britain’s role as a world leading financial centre is to be supported.
It should help to thwart efforts by French president Emmanuel Macron to lure financiers to Paris with blandishments of champagne and tax breaks.
Britain’s top bankers will benefit. The purpose is to make sure that London remains a magnet for the best and brightest investment bankers of Goldman Sachs, JP Morgan, Morgan Stanley and the like.
There also are sound regulatory reasons for supporting the change. Under the Brussels-imposed cap, bonuses have been limited to twice basic salary. This has had the distorting effect of increasing fixed costs and divorcing them from performance.
The other element of the Truss reforms was to cut the top rate of income tax from 45pc to 40pc so as to unleash enterprise.
As a result of freezing allowances, more residents have been forced into higher tax brackets. Over to you Chancellor.
Lifeline for GSK
GSK’S pioneering work with vaccines, which includes jabs for shingles, cervical cancer and HIV, has few equals, in spite of its stumble with Covid.
The next big hope is targeting respiratory disease, a big killer of older people. It has disclosed ‘positive’ results for its RSV vaccine arexvy among those aged 50 to 59.
This is in addition to the success it has had with over-60s in the US, Europe and Japan. Chief executive Emma Walmsley’s vision of a flourishing stand-alone pharma and vaccine innovator is happening.
Desert storm
International Monetary Fund (IMF) managing director Kristalina Georgieva largely was missing in action as the atrocities in Israel on October 7 and the military response unfolded during the fund’s annual meetings in Marrakech, Morocco.
Now she has popped up at ‘Davos in the Desert’ in Riyadh saying the conflagration is ‘more jitters’ for an anxious world.
She added that for Egypt, Lebanon and Jordan the impact in terms of tourism and investment already is apparent.
That is all very helpful but more fascinating is what Georgieva did not say.
There was no reference to Israel where the 7/10 terrorism attack and war already have undermined its credit rating, with S&P Global putting it on a ‘negative’ watch.
The credit agency warned the Israel- Hamas war could damage the economy and security in the country.
Nor did she make any reference to her host Mohammed bin Salman’s (MBS) responsibility for uncertainty. Surging oil prices, which threaten the cost of living in the West, could send interest rates higher.
They are as much a result of Saudi Arabia’s production cuts as the conflict in the Middle East.
It was left to JP Morgan boss Jamie Dimon to urge MBS not to abandon the Americanled initiative to establish official relations with Israel. Not hard, is it!
