Will the bonus bubbly still flow as reality bites for British banks?
The fortunes of Britain’s biggest lenders may well be reflected by a mix of celebratory champagne and commiserative pints by next week, as bankers with an eye on their bonus assess the fallout from a patchy earnings season.Bosses of the UK largest lenders are due to kick off the annual reporting period from Thursday, but their financial performance – and any resulting bonuses – will be overshadowed by corporate shake-ups and job losses.Of the big four bank bosses, NatWest’s Paul Thwaite has one of the easiest jobs ahead.While he is expected to report a 1.8% drop in annual pre-tax profits to £6.
1bn on Friday, he will be able to hail the fact that the government’s stake is months away from disappearing.The Treasury spent nearly £46bn to bail out NatWest, then known as Royal Bank of Scotland, at the height of the financial crisis in 2008, leaving taxpayers owning about 84% of the lender.That stake has since dwindled to less than 8%, despite a campaign to sell shares to the public, fronted by Sir Trevor McDonald, having been ditched.Instead, Thwaite now expects to return the bank to private hands by June.NatWest bosses are also reportedly considering boosting the bonus pool by up to 25% to £450m, giving its bankers much to celebrate.
There will be far less cheer at HSBC.Bankers at the high street rival are steeling themselves for a swathe of job cuts, with new chief executive Georges Elhedery due to reveal the details of a major restructuring plan, alongside its results on 19 February.First announced in October, the overhaul involves dividing the bank’s operations into eastern and western markets in a move that many believe could help the bank navigate competing political pressures from Washington and Beijing.And while Elhedery had already said he would cut jobs and let some of his most senior staff go, he shocked bankers last month by announcing plans to shut parts of its investment banking operations – including those handling mergers and acquisitions, and equity fundraising for listed companies – in the UK, US and Europe.It is unclear how many of its nearly 214,000 global staff, including its 40,000 UK workers, will be axed as part of those plans, and bankers fear their bonuses will also suffer.
“Morale is horrible,” one UK-based HSBC investment banker told the Observer,“Everyone is panicking, everyone has sent out CVs,” And for those yet to jump ship, patience is waning,“What’s the motivation for me to work when I’m not going to be rewarded?” the staffer said,Fears over a combined £44bn compensation bill over the motor finance commission scandal could also cast a cloud over full-year earnings for UK banks, including Lloyds and Barclays.
Lenders have been grappling with the fallout of a shock court judgment in October that vastly expanded a Financial Conduct Authority investigation into motor finance commissions and sent compensation estimates soaring.The landmark ruling determined that paying a “secret” commission to car dealers who had arranged the loans without disclosing the sum and terms of that commission to borrowers was unlawful.Lloyds is expected to suffer a 15% drop in full-year profits to £6.4bn, according to average analyst estimates.But predicting future profits comes with an asterisk, given uncertainty over the outcome of a supreme court case in April where car finance companies hope to overturn the motor finance ruling.
While Lloyds is not a party to the court case, it has the biggest exposure to car loans out of the UK’s high street banks.RBC Capital estimates that it could be on the hook for up to £4.6bn.Chief executive of Lloyds Charlie Nunn may struggle to drum up excitement over his progress towards his five-year strategic plan, which has involved branch closures and a major push into digital banking.There is one bright spot for UK bankers, though.
Barclays is expected to post a 23% jump in annual profits to £8bn on Thursday, according to Shore Capital, leaving staff in line for large payouts,Its dealmakers are also set fair, as bankers step into the “go mode” some claim Donald Trump’s return to the White House has injected into Wall Street, where the UK bank has offices,Barclays bulked up its half-year bonus pool for the first time in three years in August, signalling that there could be larger payouts for bankers who can now earn 10 times their salary since the EU bonus cap was scrapped,Only the motor finance payouts, estimated to cost it £442m by RBC, may provide a blemish for the bank, which may be the standout performer in a rocky reporting season,
At least half of WH Smith high street stores could close under a new owner
At least half of WH Smith’s 500 high street stores could be closed by any new owner, industry experts say, raising the prospect of sweeping job losses at the ailing retailer.Predictions for the eventual size of the chain, which employs about 5,000 people in its high street shops, range from no more than 250 stores. Offers for the group are expected in the next few weeks and a deal completed by early May.WH Smith is in talks with potential bidders including the private equity groups Hilco and Alteri, the Hobbycraft owner, Modella Capital, and the HMV owner, Doug Putman, as it aims to focus on its fast-expanding travel business, which is opening outlets overseas as well as in UK stations, airports and hospitals.They are expected to pay as much as £100m, with assets including the Richard & Judy Bookclub brand, 200 sites that include a large post office, and the rights to distribute Toys R Us products in the UK
An existential risk: can BP avoid becoming a prime takeover target?
When BP’s board faces shareholders at the oil company’s investor day later this month, there will be many questions to answer, and for many, the biggest one will be: how did things go so wrong?The FTSE 100 company was once valued at more than £140bn, but today its shares trade at a market valuation of less than half that sum. BP has lost almost a quarter of its value in the past two years, while its rivals in Europe and the US have managed to grow and in some cases report record annual profits.In recent weeks the company has set out plans to cut thousands of jobs from its global workforce, amounting to 5% of its staff, in an effort to save billions in costs to appease its worried shareholders.BP has fallen out of favour with many investors since embarking on a plan to slash its oil and gas production in favour of spending billions on renewable energy projects. Although it has since backtracked from its full green ambitions, for some the road ahead appears uncertain, though reports emerged at the weekend that the activist investor firm Elliott Investment Management has built a “significant” stake in BP and sees it as undervalued
AI is developing fast, but regulators must be faster | Letters
The recent open letter regarding AI consciousness on which you report (AI systems could be ‘caused to suffer’ if consciousness achieved, says research, 3 February) highlights a genuine moral problem: if we create conscious AI (whether deliberately or inadvertently) then we would have a duty not to cause it to suffer. What the letter fails to do, however, is to capture what a big “if” this is.Some promising theories of consciousness do indeed open the door to AI consciousness. But other equally promising theories suggest that being conscious requires being an organism. Although we can look for indicators of consciousness in AI, it is very difficult – perhaps impossible – to know whether an AI is actually conscious or merely presenting the outward signs of consciousness
How some objects can have a mind of their own | Brief letters
I have great empathy with Adrian Chiles’ protectiveness of inanimate objects (Why am I so sad about seeing a robot get beaten up?, 5 February), but these objects can exercise tyranny, so we should beware the jacket that won’t let you put it on, the paper serviette that it is impervious to fluid and, of course, any self-hiding object.Jonathan HauxwellCrosshills, North Yorkshire If President Trump thinks that it is reasonable to relocate 2 million people from the Gaza Strip in the interests of peace (Report, 6 February), presumably the same logic should apply to the 500,000 Jewish settlers illegally occupying lands in the Palestinian West Bank.Ian MartinFalmouth, Cornwall If Donald Trump Jr decided to eat the rare duck he’s alleged to have shot in the Venice lagoon (Report, 5 February), would he get the orange sauce from his dad?David ProtheroHarlington, Bedfordshire When did laundry become the word for getting clothes at home clean (Pass notes, 5 February)? I still do the washing.Janet MansfieldAspatria, Cumbria A case of cutting his nose off despite his face (Makeup artist tried to remove Adrien Brody’s nose by mistake on set of The Brutalist, 6 February).Steve BarnesLondon Have an opinion on anything you’ve read in the Guardian today? Please email us your letter and it will be considered for publication in our letters section
New York Jets and Aaron Rodgers to part ways, according to reports
Aaron Rodgers’ brief and unsuccessful career with the New York Jets appears to be over, with multiple reports that the team and quarterback are parting ways.Fox Sports’ Jay Glazer initially reported on Sunday that the Jets told Rodgers last week that they intended to move on from him. ESPN and the NFL Network later said their sources confirmed the news.There had been speculation for some time that Rodgers would leave the Jets, with the quarterback and team both refusing to confirm the relationship would continue. Rodgers joined the Jets in the run-up to the 2023 season but his first campaign ended on the first drive of the first game of the season when he tore his achilles tendon
Furbank and Feyi-Waboso fitness boost bolsters England’s Six Nations charge
England are hopeful George Furbank and Immanuel Feyi-Waboso will be back for the business end of the Six Nations campaign to bolster their title push after keeping their hopes alive with victory against France.The Northampton full-back Furbank has been out of action since December with a broken arm while Feyi-Waboso is nursing a shoulder injury and both were considered in danger of missing out on the entire championship. But after the last‑gasp win on Saturday kick‑started England’s campaign Steve Borthwick revealed both players could yet return for his side’s run-in.The head coach heralded the 26-25 victory against France as evidence of his side’s improvement and, after two rounds of the Six Nations, England sit third in the table with six points, four behind the leaders Ireland, and can consider themselves in the title race.“I’m really happy for the players that they’ve got the win,” Borthwick said
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