Barclays Plc expects its competitors to lure savings customers with higher interest rates, a trend it warned will weigh on the profitability of the firm’s UK business this year.
(Bloomberg) — Barclays Plc expects its competitors to lure savings customers with higher interest rates, a trend it warned will weigh on the profitability of the firm’s UK business this year.
The British bank is already seeing a rise in deposit migration as it said in its full-year earnings Wednesday that the net interest margin for its UK business will rise more slowly than expected to 3.2% this year.
That’s partly because advances in online banking and the prevalence of fintech upstarts have made it easier to switch accounts, the bank said. Barclays’s UK customer deposits fell less than 1% to £258 billion ($311 billion) over the past year.
“We are expecting to see an intensification of switching,” Finance Director Anna Cross said on a conference call with analysts. “It’s very easy for customers to move that money around.”
The jump in UK interest rates to 4% in recent months seems to be accelerating years of work by policymakers and startups to challenge the UK’s big five lenders. The Financial Conduct Authority last year found that “while still strong, there are signs large banks’ historic advantages are starting to weaken, driven by digital innovation and changing consumer behavior.”
JPMorgan Chase & Co., which entered the UK retail market in 2021, is offering customers 3% interest on its saver account, while Starling Bank, founded in 2014, has an account with a 3.25% rate. The bosses of the biggest banks, meanwhile, had to defend their offerings at a parliamentary hearing earlier this month, where one MP called their rates “ungenerous.”
Barclays, for its part, has a product it calls a “rainy day saver” account that offers certain customers 5.12% on balances as high as £5,000. “The vast majority” of people opening these accounts have done so online, Cross said.
“We have strong rates out there but they’re very much in our control,” Cross said. “That’s something we can certainly manage.”
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