From February 17 to February 25, the five major banking groups in the UK (HSBC, Barclays, Lloyd's, National Westminster Abbey and Standard Chartered) successively released their annual performance reports for 2021, with a significant increase compared with the performance of the five major banks in 2020. The following points deserve attention:
First, driven by the improvement of macroeconomic prospects, the reduction of unsecured loan balances and a benign credit environment, the five major UK banks released a large number of provisions, with a maximum profit contribution of more than 80%. According to the performance report of HSBC Group, the after tax profit in 2021 increased by US $8.6 billion to US $14.7 billion compared with that in 2020, a year-on-year increase of 141%, and the pre tax profit increased by US $10.1 billion to US $18.9 billion. One of the main reasons for the group's reported profit growth was the net release of expected credit losses and other credit impairment charges of US $900 million, accounting for 6.11% of the annual net profit. Barclays Bank's annual operating revenue was £ 21.9 billion, with a pre tax profit of £ 8.4 billion and a net profit of £ 6.38 billion, up 317% from £ 1.53 billion in 2020. Under the condition of good economic recovery momentum, the provision of £ 700 million was released throughout the year, accounting for 10.97% of the net profit, but the provision coverage of unsecured loans is still higher than the level before the epidemic. Lloyds Bank's net profit growth rate ranks first among the five major banks, with a year-on-year increase of 326% to £ 5.88 billion, of which the provision correction contributed 28.9%. Among the £ 1.699 billion of credit loss reserves released, the retail banking line released £ 1.172 billion and the commercial banking line released £ 527 million; As the UK's economic outlook is stronger than previously predicted, £ 601 million was released in the fourth quarter alone. The net profits of National Westminster Bank and Standard Chartered Bank are at the downstream level among the five major banks, with £ 2.95 billion and £ 1.77 billion respectively. However, the provision release of the two banks is at the upper middle level among the five major banks, with £ 1.28 billion and £ 1.52 billion respectively appropriated in the whole year, accounting for 43.3% and 85.9% of the annual net profits respectively, which has become the core factor driving up profits.
Second, the net interest margin level and change trend of the five major banks are differentiated, and the contribution of net interest income is very different. The net interest margin of the five major banks in the UK was significantly differentiated in 2021. HSBC and Standard Chartered Bank, which are more internationalized, were affected by the global low interest rate environment. The annual Nim level was low, 1.2% and 1.21% respectively, a year-on-year decrease of 12 and 10 basis points; Net interest income decreased by 4% and 1% year-on-year respectively, contributing 53.4% and 46.3% of total income. According to the performance report of HSBC in 2021, due to the transfer of some interest bearing asset balances from financial investment to short-term funds with low income, and the decline of customer loan yield, the average interest bearing asset yield decreased by 36 basis points. Even if the financing cost of average interest bearing liabilities also decreased, it failed to offset the negative impact on the scale of net interest income. Barclays Bank and National Westminster Bank ranked at the top of the five banks with a net interest margin of 2.52% and 2.08% respectively, but they still decreased by 9 and 5 basis points respectively compared with 2020, mainly due to the reduction of deposit interest rate, unsecured loan balance and credit card business scale, The net interest income of Barclays and National Westminster Bank still contributed 79.6% and 72.4% of the total income respectively, ranking in the top two of the five major banks. Lloyds Bank maintained a high net interest margin and a slight expansion trend. The annual Nim was 2.54%, an increase of 2 basis points year-on-year. Thanks to the strong growth of mortgage loans and the increase in the income of government supported loan business, the net interest income in 2021 was £ 11.16 billion, accounting for 70.8% of the group's total income.
Third, the non interest business sectors of Barclays and Standard Chartered recorded record performance, the revenue of HSBC's strategic key areas maintained growth, and the development of non interest business maintained a positive momentum. Barclays Bank, as the sixth largest investment bank in the world, achieved a record high profitability of corporate and investment banking lines in 2021, with a pre tax profit of £ 5.8 billion, accounting for 69% of the group's total pre tax profit, of which both investment banking income and stock income broke historical records. Standard Chartered Bank's wealth management business performance reached an all-time high, with revenue increasing by 12%, Global trade business revenue increasing by 16%, and financial market business basically unchanged year-on-year. The revenue of HSBC's market and securities services line has decreased compared with the strong 2020, but there is still growth in other strategic focus areas, including wealth business and Global trade and accounts receivable financing; Among them, the wealth business is the most prominent in Asia, attracting us $36 billion of new net investment assets in 2021. On this basis, HSBC announced that it would carry out acquisition plans in Singapore and India to continue to develop its wealth management ability in Asia.
Fourth, under the expectation of good economic growth prospects in the UK and the acceleration of the interest rate increase process of the Bank of England, it is expected that the domestic business performance of the UK banking industry will be stable in 2022, and the potential performance fluctuations may be affected by international factors. In January this year, the International Monetary Fund predicted that the UK's economic growth in 2022 would be 5%, higher than the global economic growth forecast of 4.9%. Financial institutions are also generally optimistic about the UK's economic growth, which is expected to be higher than that of the United States, Germany and France; According to the latest data, the UK inflation rate in January increased by 5.5% year-on-year, the highest in nearly 30 years. The production price index and retail price index simultaneously exceeded market expectations. The risk of high inflation will promote the Bank of England to further tighten monetary policy. Under the combined action of the above two factors, the net interest margin of the UK banking industry is expected to further expand. Lloyd predicts in its performance report that its net interest margin will increase by 6 basis points to 2.6% in 2022, and the interest income of commercial banking in the UK is expected to continue to grow. On the other hand, some large British commercial banks are famous for their high degree of internationalization, and there is a high possibility of performance fluctuation due to the influence of international factors. For example, after the conflict between Russia and Ukraine, the prices of natural gas, electricity, fuel, pension and food in the UK are soaring, which may affect the savings of domestic residents and the development of overseas business of the group; In addition, other international factors may also have an impact on the profitability of the UK banking industry. For example, HSBC showed in its latest annual report that it had increased the reserves related to the development status of China's commercial real estate, while Standard Chartered had withdrawn $300 million related to the impairment of its investment in overseas projects. In the current increasingly complex international situation, the UK banking industry generally continues the business strategy of cost control to improve the group's operation efficiency and promote revenue growth.
