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Yahoo
39 minutes ago
- Yahoo
High street banks lost £100bn in customer savings to rivals since 2019
High street lenders have lost the equivalent of £100 billion in customer savings to online banks and building societies as they come under pressure to adapt amid a major shift in the sector, according to a report. KPMG's latest State of the Banks report found that traditional banking groups saw their market share in deposits drop sharply from 84% in 2019 to 80% in 2024. It came as competitors – such as new challenger banks, specialist lenders and building societies – lured customers away by paying higher savings rates. The UK banking sector also suffered a £3.7 billion combined drop in total pre-tax profits last year, marking the first major downturn since the rebound seen in the wake of the pandemic, according to KPMG. It warned that increasing competition, rising costs and a wave of consolidation will change the shape of the sector in the years ahead. Peter Westlake, partner in KPMG UK's banking strategy team, said: 'The post-Covid profit boom is over. 'Banks are facing a lower-growth, higher-cost environment that demands transformation at pace. 'While we can expect profitability to broadly remain sound this year, the entire sector needs to show how they are preparing for challenges ahead.' Bank costs increased by 6% in 2024, which together with falling productivity among workers, is set to put bank profits under pressure, according to the report. It forecasts that the sector's average return on equity, which is a key performance measure for banks, could drop by more than a third from a peak of 13% in 2023 to 8% by 2027 – the equivalent of an £11 billion drop in annual profits. KPMG's experts urged banks to overhaul their business models and embrace artificial intelligence (AI) to tackle the challenges. 'The winners will be those that move beyond tactical cost-cutting and proactively address oncoming market headwinds through business model transformation,' said Mr Westlake. Any move to scrap so-called ring-fencing in the UK sector, which requires banks to separate their retail activities from investment banking, would also spur on further change, KPMG said. Chancellor Rachel Reeves announced plans to reform the ring-fencing regime last month as part of wider measures to loosen regulation and boost growth. Peter Rothwell, head of banking at KPMG UK, said: 'Evolving regulation, particularly the reform of ring-fencing, is set to reshape the competitive landscape. 'Raising thresholds could favour recent entrants, particularly well-capitalised US players, accelerating their push into the UK retail market and intensifying competition.'
Forbes
41 minutes ago
- Forbes
Botswana Muddies Anglo American's Plan To Sell De Beers
Be careful what you wish for is one of the world's oldest sayings and never truer than in the case of Botswana, a small southern African country keen to take full control of the De Beers diamond business during a diamond price crash. Already a 15% owner of De Beers, Botswana says it wants full control of the business which has dominated the diamond trade for more than century. It could get what it wants as London-based Anglo American, the majority owner of De Beers, runs a sales process as part of a corporate simplification program launched to beat off a takeover bid from arch-rival, Australia's BHP Group. Selling De Beers is proving to be a complex process thanks to a steep fall in the value of natural (mined) diamonds which have been blitzed by cheap but identical laboratory grown gems. Anglo American has made a series of De Beers asset value write-downs to currently value the business at $4.9 billion but it is not expected to attract a price anywhere near that in the sales process which started last month. Further clouding the future of De Beers is a breakdown in its relationship with Botswana, the world's second biggest producer of high-quality diamonds after Russia. Botswana's Bruised Budget Falling prices and reduced output has bruised Botswana's budget which is heavily reliant on diamond income. Financial pressure from the diamond crash sparked an outburst from Botswana's president, Duma Boko last month in which he accused De Beers of not doing its job of promoting diamonds, provocatively saying of Botswana's diamonds that 'maybe we should take control and sell them ourselves'. The comment might have been rhetorical to prod De Beers into doing more to fight the flood of lab-grown the remark was also taken by seriously some diamond industry observers who questioned whether Botswana really could take control of De Beers, a worrying situation given the delicate sales process being conducted by Anglo American It remains to be seen whether a threat by Botswana's president to take control of the country's diamond industry will dissuade potential bidders or whether he was suggesting that Botswana itself buy Anglo American's 85% stake, a heavy lift for the small country which is under financial pressure. Citigroup, a U.S. bank, said last month that the diamond price crash could force an additional devaluation of the country's currency, the Pula, on top of an already announced 2.76% decline by the Bank of Botswana in July. Currency Devaluation David Cowan, chief Africa economist at Citi was quoted by the Bloomberg news service two weeks ago saying that another devaluation this year could not be discounted while interest rates might also have to be increased. It is possible that the government of Botswana is misreading the seriousness of the situation facing the diamond mining industry, just as big diamond mining companies such as Anglo American have done for the past few years, unwilling to accept that lab-grown gems have captured the market and there is unlikely to be a recovery. The reality of mined diamonds today is that profitability has dried up, as shown in the $189 million loss posted by De Beers in the six months to June 30. That loss, plus the suggestion that Botswana should take control of De Beers will not have made the business more appealing to potential buyers. It also raises the issue of Botswana being careful about what its wishing for and why proposing to buy De Beers could be a case of trying to catch a falling knife.
Yahoo
44 minutes ago
- Yahoo
High street banks lost £100bn in customer savings to rivals since 2019
High street lenders have lost the equivalent of £100 billion in customer savings to online banks and building societies as they come under pressure to adapt amid a major shift in the sector, according to a report. KPMG's latest State of the Banks report found that traditional banking groups saw their market share in deposits drop sharply from 84% in 2019 to 80% in 2024. It came as competitors – such as new challenger banks, specialist lenders and building societies – lured customers away by paying higher savings rates. The UK banking sector also suffered a £3.7 billion combined drop in total pre-tax profits last year, marking the first major downturn since the rebound seen in the wake of the pandemic, according to KPMG. It warned that increasing competition, rising costs and a wave of consolidation will change the shape of the sector in the years ahead. Peter Westlake, partner in KPMG UK's banking strategy team, said: 'The post-Covid profit boom is over. 'Banks are facing a lower-growth, higher-cost environment that demands transformation at pace. 'While we can expect profitability to broadly remain sound this year, the entire sector needs to show how they are preparing for challenges ahead.' Bank costs increased by 6% in 2024, which together with falling productivity among workers, is set to put bank profits under pressure, according to the report. It forecasts that the sector's average return on equity, which is a key performance measure for banks, could drop by more than a third from a peak of 13% in 2023 to 8% by 2027 – the equivalent of an £11 billion drop in annual profits. KPMG's experts urged banks to overhaul their business models and embrace artificial intelligence (AI) to tackle the challenges. 'The winners will be those that move beyond tactical cost-cutting and proactively address oncoming market headwinds through business model transformation,' said Mr Westlake. Any move to scrap so-called ring-fencing in the UK sector, which requires banks to separate their retail activities from investment banking, would also spur on further change, KPMG said. Chancellor Rachel Reeves announced plans to reform the ring-fencing regime last month as part of wider measures to loosen regulation and boost growth. Peter Rothwell, head of banking at KPMG UK, said: 'Evolving regulation, particularly the reform of ring-fencing, is set to reshape the competitive landscape. 'Raising thresholds could favour recent entrants, particularly well-capitalised US players, accelerating their push into the UK retail market and intensifying competition.'
