Bank of England Governor Andrew Bailey committed to cash and take on AI
The Bank of England is still committed to cash which continues to be used as an important budgeting tool, particularly for low income families, says its Governor Andrew Bailey. Mr Bailey said the central bank is also experimenting, like many organisations, in the use of artificial intelligence (AI). A decade ago cash was used in around 50% of transactions, but is now just over 10%. However, regulator the Financial Conduct Authority (FCA) says that more than one million people are excluded from digital banking because they don’t have bank accounts. The FCA also estimates that around two million use cash for the majority of their purchases. Mr Bailey said: “We can observe that the usage of cash has declined. However, when we ask people if they still want to have cash the answer comes back clearly yes, and I can understand why. We feel more comfortable if we have something in our pocket which we know we can use in case as it were. “There is also a section of the population, particularly those on low incomes, that use it as a budgeting tool. So, our view is very clear at the Bank of England, which is that we will supply cash as long as people want it, and the evidence is that they do want it. “So, we are going to go on providing cash. However, the paradox is this, while usage is declining, when I look at the amount on our balance sheet, which is the amount in issue, it hasn’t gone down at all.” On the central bank’s use of artificial intelligence, Mr Bailey said: “We are experimenting in how we can put it to work in sort of the analysis of our analytical functions. “One of the things I would say about it at the moment, and this will change no doubt, it’s really what I call a one step ahead forecasting. If you give it a world of information it will tell you the next step, but our world of forecasting is much more structural, so we haven’t found yet that AI can really take that sort of thing on, but it will develop no doubt.” The governor said he also uses AI to help summarise speeches. He added: “When I write speeches they are always too long. I don’t use it (AI) to write speeches, but it is quite a good summarising tool actually... and saves me a load of angst having to sit down for a few hours having to shorten one of my speeches.” The Bank uses AI platform Copilot. Latest official figures show weak productivity in both the public and private sectors. Mr Bailey said: Pre-Covid to today, the public sector (productivity) and the health part of it. I am looking at it quite hard as it is important, but the question for me is how much of that is actual and how much is the measurement and I don’t know, but I suspect both is the answer, However, I think it is a very important question.” On home ownership he said: “We have got an ageing population and therefore more people owning their houses outright.
Lloyd's of London reports profit drop to £9.6bn amid US wildfire claims and market volatility
Lloyd's of London, the world's premier insurance and reinsurance marketplace, has announced a pre-tax profit of £9.6bn for 2024, down from the £10.7bn reported in 2023. The market, comprising over 50 leading insurance firms and more than 380 registered Lloyd's brokers, posted gross written premiums of £55.5bn for 2024, marking a 6.5 per cent increase from the £52.1bn recorded in 2023, as reported by City AM. Lloyd's attributed the growth in premiums to an 8.5 per cent surge in volume (7.6 per cent from existing syndicates and 0.9 per cent from new ones), along with price changes contributing 0.3 per cent and foreign exchange movements offsetting growth by 2.3 per cent. Overall, the market reported an underlying combined ratio of 79.1 per cent, a decrease from the 80.5 per cent recorded in 2023. The major claims ratio increased to 7.8 per cent in 2024 due to significant catastrophe events, including hurricanes Milton and Helene and the Baltimore Bridge collision. Earlier this year, the market warned in a trading update that it could face a £1.8bn hit from the Californian wildfires. Improved combined ratios were attributed to higher prior year reserve releases, a lower attritional loss ratio, and stable expenses. The market also benefited from a solid return on its investment portfolio, with the investment return for the year standing at £4.9bn, down from the £5.3bn recorded in 2023. Lloyd's reported that despite the overall benefit from higher interest rates, investment returns were impacted by mark-to-market losses due to market volatility in the fourth quarter, leading to a decrease compared to the previous year. John Neal, the outgoing chief executive of Lloyd's of London who is set to join insurance broker AON in January, commented: "The Lloyd's market has delivered another year of outstanding financial performance, with a superb combined ratio, underlying combined ratio and attritional loss ratio supporting a capital position and claims reserve strength that is as strong as it has ever been."
Barclays shares could be set for 18% rise after profit beat, experts say
Analysts have reaffirmed their 'Buy' rating on shares of Barclays after the bank surpassed expectations with its recent results. The FTSE 100 lender reported a pre-tax profit of £8.1bn in 2024, exceeding the estimated £8.07bn, as reported by City AM. "We believe strong capital generation should support a higher valuation and plans to return more than £10bn over 2024-26 seem conservative," stated Peel Hunt analysts Robert Sage, Stephen Payne and Stuart Duncan. They further commented: "The six per cent rise in income, 24 per cent increase in profit before tax and double-digit return on tangible equity confirm that financial performance is stepping up. "The company guided for structural hedge income to increase a further £1bn in 2025, and market conditions for the investment bank currently appear supportive, especially in the US." Despite initial guidance remaining unchanged, they suggested the 12 per cent return on tangible equity goal seemed "increasingly realistic (if not conservative)." Barclays shares initially dropped by as much as five per cent following the results, but quickly rebounded as analysts labelled the dip a "temporary glitch." Peel Hunt subsequently increased its target price for the bank by 11.8 per cent to 359p, with the bank's shares trading above 300p on Tuesday morning. Barclays also announced a share buyback of up to £1bn during its annual results, expected to commence in the first quarter of 2025. According to analysts, "Share buybacks remain highly accretive not only to Barclays earnings per share but also to its tangible net asset value, to a significantly greater degree than Lloyds and Natwest, and in our view the continued prioritisation of buybacks is beneficial for equity holders." They also noted that Barclays has a "greater focus on buybacks than its two peers". The acquisition of Tesco Bank's retail banking business in November 2024 contributed to an increase in fourth-quarter income, with the lender experiencing a £0.6bn gain on the first day. Peel Hunt analysts commented: "Barclays never has been an expensive stock."
Co-op Bank mortgage applications soar in first financial results since takeover
Coventry Building Society's new subsidiary, The Co-op Bank, has reported a boom in mortgage applications in its first set of financial results since the acquisition. Despite a slight dip in pre-tax profit for 2024, down to £116.2m from £120.9m in 2023, the results were in line with company expectations, as reported by City AM. Lower mortgage margins and increased savings rates impacted net interest income, leading to dampened profits. However, mortgage applications saw a significant increase, surging 50 per cent to £3.44bn, compared to £2.26bn in 2023. The bank attributed this to simplifying its IT infrastructure, which allowed for faster responses and larger loans. The average loan size rose to £207k from £159k. Interim chief executive Steve Hughes said: "The bank has made significant progress in simplifying its IT infrastructure, delivering the commitment to exit legacy platforms and data centres and bring £19bn of mortgage balances and £5bn of savings balances onto a single system." In addition to its IT transformation, the bank launched several switching campaigns in 2024 to attract and retain customers, resulting in positive net current account switching for the first time in over a decade. Despite rising inflation and an increase in customer fraud remediation costs, the lender managed to reduce costs by one per cent to £390.7m. Coventry Building Society finalised its £780m takeover of the bank on January 2, 2025, returning the lender to mutual ownership. Hughes remarked: "I am delighted to welcome The Co-Operative Bank to Coventry Building Society, bringing the original ethical bank once again into the ownership of a mutual organisation. "
North East liquidation levels rocket as rising costs bite, new figures reveal
Soaring numbers of North East businesses went into liquidation over winter as the pressures of rising costs triggered collapsing finances, new figures show. R3, the UK’s insolvency and restructuring trade body, has explored the number of companies which called in liquidators as well as the volume of debts they accrued between December and February, revealing how some regional businesses have been struggling to stay solvent. The trade body’s analysis shows the number of North East businesses in liquidation rose by 42% over the three-month period, compared to the same period last year, leading it to call for firms to take swift action. R3’s analysis of data, provided by Creditsafe, shows there were 186 companies in the North East in liquidation who owed money to their creditors, with 64 in December, 49 in January and 73 in February, compared to the previous year’s total of 131. The North East and Yorkshire and Humberside were the only two UK regions or nations to see a yearly rise in companies in liquidation who owed money to their creditors, with Yorkshire and Humberside seeing a 17.4% rise. Kelly Jordan, chair of R3 in the North East, said: “The rise in companies in liquidation with outstanding debt across the North East is a sign of the impact of the ongoing financial pressures faced by businesses in the region. “Many companies have been grappling with increased costs and lower consumer spending for some time now, and this has made it increasingly difficult for them to pay their bills on time, and in some cases, remain solvent.” The debt owed by companies in liquidation in the North East totalled over £3.4m over the winter months, a rise of more than £2.7m when compared to the previous winter’s total of around £780,000. Companies which went into liquidation within the region include famous music shop JG Windows Ltd, which closed at the end of last year when its owner admitted it could no longer compete with big online retailers. The closure brought to an end a 115-year history as a shop selling instruments and sheet music to everyone from aspiring musicians to rock stars. Liquidation documents later showed it had debts of £956,986, although assets worth £148,186 were available to return funds to preferential creditors. Instruments and other stock were auctioned off in February Meanwhile in February rising costs and increased competition led Riley’s Fish Shack owner Adam Riley to liquidate his wholesale business Riley’s Fish Limited, in moves to protect jobs and focus on strengthening the Fish Shack. A statement of affairs shows the firm was liquidated with a deficiency of £427,511 and a list of 53 creditors, including a number of food and drink firms. Ms Jordan, who is a partner at Muckle LLP, added: “If directors are worried about the health of their business they shouldn’t wait to ask for help.
Lloyds Bank to send 200 senior staff on AI training at University of Cambridge
Lloyds Banking Group has unveiled plans to enrol over 200 of its senior staff in an intensive 80-hour AI training programme at the University of Cambridge. The FTSE 100 bank has partnered with edtech firm Cambridge Spark for a customised six-month training course aimed at boosting AI proficiency across its management team. The inaugural group of 30 Lloyds leaders attended a rigorous two-day session at the University earlier this month, which included a lecture by Professor Stelios Kavadias, an expert in innovation and technology management. These sessions, delivered by Cambridge Spark in conjunction with the University of Cambridge, are designed to identify opportunities through AI and implement AI solutions to improve operations and customer experience, as reported by City AM. This initiative builds on the existing partnership between Lloyds and Cambridge Spark, which has previously offered lessons in practical industry skills for budding data scientists and engineers. Lloyds' Group Chief Operating Officer, Ron van Kemenade, said: "AI is a game-changer for financial services, and we're investing to enhance our services with cutting-edge technology. " He added: "The programme with Cambridge Spark will empower our business leaders to further innovate with AI and drive commercial excellence using this transformative technology. "Our approach to AI is based on integrating it deeply throughout every aspect of our business rather than limiting it to a centralised technical team. We're building on our existing expertise to develop the most AI-capable leadership team in banking." Dr. Raoul-Gabriel Urma, founder and CEO of Cambridge Spark, commented: "Advancing AI capabilities represents both the greatest challenge and opportunity for today's businesses. " "Enhancing these capabilities within senior leadership creates a powerful multiplier effect that drives innovation throughout the organisation. We're excited to support Lloyds Banking Group in this strategic investment." Lloyds has shown commitment to expanding AI and technology across its operations, marked by the launch of its 'AI Centre for Excellence' last year. Rohit Dhawan, former Amazon executive who leads the centre, stated: "By staying at the forefront of AI technology and maintaining a strong ethical foundation, Lloyds Banking Group aims to lead the financial industry into a new era of digital transformation."