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Lloyds Banking Group replies to ‘savings’ critics

Image Source: Bloomberg

Lloyds Banking Group, the UK’s largest lender, has defended itself against accusations of not doing enough for savers.

According to CEO of Lloyds Banking Group Charlie Nunn, the company is focused on making ends meet for consumers with limited financial resources.

“It’s critical to acknowledge that 80% of clients have less than £5,000 in savings, with 65% having less than £1,000,” he stated.

Lloyds Banking Group and other banks have been chastised for failing to provide competitive interest rates to savers.

For a decade, the Bank of England’s benchmark interest rate was at historically low levels until December 2021, when it began to grow steadily.

It is currently at 4%, up from 0.1%, forcing several banks to raise consumer mortgage rates.

The amount of the base rate increase passed on to customers varies – According to Anna Bowes of the independent comparison website Savings Champion: “When it comes to letting down their customers, high street banks are among the worst offenders. This is a huge setback for desperate savers, especially since high-street banks keep so much of their money.”

The announcement came as the bank announced a pre-tax profit of £6.9 billion in 2022, mirroring the gains it made the previous year.

Despite a 14% increase in revenue because of higher interest rates, provisions for bad loans totaled about £1.5 billion throughout the year, resulting in flat earnings.

According to the lender, it is witnessing “very moderate indicators of deterioration” in its credit book.

According to Matt Britzman, an equities analyst at Hargreaves Lansdowne, the impact of the cost-of-living crisis on consumers and businesses is only having a minor influence on debt repayment for the time being. However, he said that he expects that to increase as the year goes on.

Lloyds Banking Group also reported a 12% rise in the staff bonus pool, now at £446 million.

It comes after the administration removed the bonus cap last year.

Lloyds Banking Group defend branch closures

Lloyds Banking Group executives have maintained that savers have access to many competitive savings plans in the face of criticism about low-interest rates.

The CEOs of four of the UK’s largest banks were dragged before Lawmakers who questioned the generosity of their savings rates.

As savers shopped about, Lloyds Banking Group, NatWest, HSBC, and Barclays UK chief executives stated deals had improved.

They also stated that branch closures were a result of shifting consumer patterns.

Saver’s preference

For a decade, the Bank of England’s benchmark interest rate was at historically low levels until December 2021, when it began to grow steadily. It has now climbed from 0.1% to 4%.

When the base rate rose, Members of the Treasury Committee stated their constituents complained because mortgage rates grew faster than the returns offered to savers.

The quartet of bank bosses believed that this debate was incorrectly centered on the interest rate offered on easy-access savings accounts, which usually have a return of less than 1%. They were described as the highest-paid panel that had sat before the committee a few times, earning more than £10m a year collectively.

They said that regular saver arrangements provided market-leading interest rates and that instant-access products were frequently used as a “gateway” to higher interest deals.

Barclays’ Matt Hammerstein, Lloyds Banking Group Charlie Nunn, HSBC’s Ian Stuart, and NatWest’s Dame Alison Rose all contended that they also urged clients to start saving.

Savings grew significantly during the epidemic, as consumers’ ability to spend was limited. However, the rising cost of living has eroded some of these savings.

The executives, whose banks control 60% of the market, stated that many individuals were actively looking for better bargains when loan rates rose. According to Mr. Nunn, price comparison websites have advanced significantly in this area.

While some were shopping around, millions needed more confidence in making sound financial decisions and expert advice.

Many homeowners may also have to pay extra mortgage payments in the coming year.

Mr. Stuart cited the launch of a new fixed-rate agreement by HSBC on the same day as the hearing, which was the first five-year deal with an interest rate of less than 4% since early October.

He contended that this demonstrated that mortgage rates were falling, despite the fact that the Bank rate was still rising and that they were significantly lower than the rates expected after the mini-budget.

Despite this, he stated that “headwinds are ahead of us, not behind us” while evaluating the number of people overdue on mortgage payments.

The bank CEOs were also challenged on branch closures, with all admitting that they have closed a number of locations in recent years.

Mr. Stuart explained that this was in reaction to the changing ways people managed their money.

He stated that 98% of transactions in December were digital, demonstrating how consumer needs from a branch have changed in recent decades.

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