Bank profits bonanza has reached its high point

Banks are to reveal whether Britons are benefiting from lower interest rates in their first major update since borrowing costs were cut this summer.

Investors will be keen to see if July’s rate cut has been passed on to mortgage and loan customers as Barclays, NatWest and Lloyd’s report third quarter results this week.

Analysts said the net interest margin – a measure of the difference in what a bank pays out in deposits and what it generates in loans – has peaked, bringing an era of bumper bank profits to an end.

It comes after the Bank of England cut the base rate from 5.25 to 5 per cent in July which should have a knock-on effect for borrowers, but also dent lenders’ profits. 

Lloyds, which also owns Halifax, is expected to report profit of £1.6 billion for the three months to the end of September, down from £1.9 billion a year earlier.

Barclays is set to announce earnings of £2 billion, up from £1.9 billion and NatWest £1.5 billion up from £1.3 billion.

Investors will also study loan and deposit growth, any asset impairments, litigation costs and cash returns to investors.

Russ Mould at broker AJ Bell said: ‘Net interest margins look to have peaked. That is key to why analysts think banks may struggle to grow earnings substantially from here.’

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