UK banks breathe easier as cut looms
As Britons prepare for the Bank of England to end six years of record-low borrowing costs, lenders may be breathing a sigh of relief.
While banks are in a better position to lend after years of repairing balance sheets, competition to supply mortgages and slack consumer demand are driving down interest rates and putting pressure on earnings. That may change, with economists predicting BOE Governor Mark Carney's Monetary Policy Committee could raise the benchmark from 0.5 percent this year.
"Banks are crying out for a genuine sustainable economic recovery, which will lead to a bit more inflation and higher interest rates," said Chris White, who helps oversee about 3.2 billion pounds ($4.8 billion) at Premier Asset Management Plc in Guildford, England. "The banks find it very difficult to make money when interest rates are flat."