Barclays: Big, beautiful or bad?
Just because Barclays generates does not mean it is ripping us off, no matter how grumpy you or I might feel about what we feel is an unjustified bank charge or the length of the queue in a local branch.
An assessment of whether its profits 鈥 or those of any company 鈥 are excessive depends on an analysis of how much competition it faces and what kind of risks it is running.
So my first instinct is to say hats off to the big blue bird for a 35% jump in pre-tax profits to 拢7.14bn. Why? Because many of its businesses are global, competitive, complex and risky. So for once why not cheer on a British winner?
It鈥檚 hard to argue that there is an absence of competition or risk for its Barclays Capital unit in international investment banking, for example. As for Barclays Global Investors, that鈥檚 a jewel of a global asset management and investment services business operating in a highly competitive industry.
Surely most of the medium-size to large companies which buy services from its separate business banking division are big enough and ugly enough to take their custom elsewhere if they鈥檙e not satisfied with what Barclays offers.
As for all its international banking businesses, in the event Barclays were making excessive profits in overseas countries, well that would be an issue for the people and governments of those countries (though a reason for Barclays鈥 shareholders to celebrate).
But there is a 鈥渂ut鈥. There are critical questions to be asked about how much profit Barclays makes from retail banking, or providing services to small businesses and individuals. This is not a market characterised by savage competition or terrifying risks. There are a handful of serious players and enormous barriers to entry.
British retail banking may not quite be a risk-free utility. But it鈥檚 not as far removed from being a utility as most of the banks like to claim.
So there is only one statistic in Barclays results that shocks me: the return it makes from UK retail banking on its so-called 鈥渁verage economic capital鈥 is a remarkable 39%, up from 35% in 2005.
That is an impressive return by any standards. It鈥檚 a performance that most hedge funds or investment banks would kill for 鈥 and surely Barclays wouldn鈥檛 argue that its UK retail banking unit is operating in a marketplace as complex and competitive as those inhabited by hedge funds or investment banks.
Admittedly it excludes the relatively poor returns it makes from Barclaycard 鈥 which appears to be in something of a mess (it made a profit of precisely nil in 2006 on the measure called 鈥渆conomic profit鈥 which takes account of the cost of capital employed).
But 39% is pretty sweet for providing millions of us with our current accounts, overdrafts, money transmission services and so on.
If all the British banks are enjoying returns anywhere near that from their domestic operations 鈥 and we鈥檒l find that out in the next couple of weeks 鈥 then it would be reasonable to ask whether excessive profits are being generated.
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In light of that, it's really quite unbelievable that, according to a 大象传媒 news article today, free banking may be under threat.
They're absolutely rolling in it - for providing an essential service to people.
The Banks are all greedy money making establishments. Most companies in the UK are very happy to make between 3 and 9% profit, not an obscene 39%. YOU CAN SEE HOW THE PROFITS ARE MADE, MOST CURRENT ACCOUNTS ONLY PAY 0.2%, and deposit accounts only 3-5%. The only word that fits Barclays is GREED.
A well balanced article. Much of the bank's success comes from its investment departments which I believe have seen significant expansion this year. Those who moan about the charges should consider the positive effect that the bank's support of numerous MBOs has on the economy as a whole. A similar debate raged on the back of BP's profits last year which again failed to take into account the source of the majority of the profit being generated.
On the other hand, whilst penalty charges have attracted a lot of press, lending practices need to be addressed. I was shocked to be offered a 拢50,000 loan last year by a high street bank. I am 25, have no real assets to secure against a loan and have a job that pays little over half that amount. No profits should be made by gambling the financial future of the country.
Robert
Your analysis of UK retail banking is a bit naive. If UK retail banking was really the money for old rope that you think it is why is that the major international banks which run major retail banking operations in other parts of the world not enterted the maket in a big way? They have after all made major investments in retail credit cards (think MBNA, AMEX and MORGAN STANLEY) and most have extensive infrastructure in the Uk already to support their investment banking and wholesale banking activities. The answer is very simple: the UK retail banking maket is less profitable than its is in other parts of the world and less profitable than it should be given the credit risks. To compare the accounting rate of return that Barclays quotes with shareholder returns that hedge funds seek suggests a poor grasp of financial principle Mr Peston. You would be hired at those hedge funds!!
City Boy
John Mc
They are however a business tasked with maximising return to shareholders not a charity providing an essential service..
This perceived im-balance can be changed by consumer pressure, however the bank will seek to re-coup the lost profit else where. An obvious more honest approach would be to end free banking, which is a "loss leader" designed to pull the customer in who will be cross sold other profitable financial service products.
As Robert Preston points out we should be pleased that a UK business is doing so well.. The same cannot be said of Abbey as their profits are now exported to Santander HQ in Spain however if they provide better customer service and cheaper banking should we be bothered ?
The bank gentry are using the opportunity afforded them by their illegal activities to 'soften up' the population for the end of free banking. Something they would dearly like.
It's utter rubbish of course, and the media shouldn't allow them to get away with it. Well done to Robert for pointing out their retail profit margin.
It always surprises me when a British company does well the first reaction is one of criticism. A few facts in Barclays' favour:
1) In this country we largely enjoy free bank accounts, something we take for granted. In many other European countries paying a fee for a simple current account is not unusual.
2) The most profitable parts of Barclays' group are the institutional businesses, namely Barclays Capital and BGI. The retail banking side is nowhere near as profitable.
3) Successful companies are a sign of a healthy economy. A strong financial sector is what distinguishes the strongest of economies - we should all be glad that the UK is one of the world's largest financial centres.
4) Finally, the vast profits (and they are vast) do not go into the pockets of a few fat cats. These are public companies. The key word there is "public". Most large companies are majority owned by our own pension funds, who as shareholders demand big profits. We all rely on these profits to fund our retirement. Yes a few at the top get huge bonuses but as these are success based who would begrudge them this? These are the people responsible for generating big profits and their individual pay awards are only a fraction of what they make for the bank. Plus bigger profits equals bigger tax bills, more jobs and so on.
Banking is not free at all, you pay for it through lower interest on your deposits or higher rates on your loans. Charging for transactions or an account maintenance fee, better matches the costs to the customers, so the customer that withdraws 拢20 ten times in a month from an ATM and hence costs the bank more, will pay more than someone who withdraws 拢200. Or someone that keeps accounts at various banks with virtually no money in each, will now pay for that privilege. The fact that banks make such large returns from retail banking comes more from customers laziness in not moving to a better deal, it still amazes me how many people still have the same account they opened when they were 16 in spite of there being better and cheaper offers.
It is The 39% which worries IBAS too. That figure (or an increased figure)may well be repeated by the other big banks, particularly those that rely almost entirely on UK Domestic operations.
However, the word excessive means nothing to bankers - their aim is to make as much profit as they can. They are not social entities either and do not willingly provide a transparent (or even what could reasonably be considered as fair value) service or product but relentlessly introduce products and fees to make as much profit as they are allowed. Where market forces operate that is OK - as your article indicates. Unfortunately, even after (and despite) the Cruickshank report (7 years ago) regulators are only now acting to provide consumers with some belated protection from bank profiteering.
After such a long period of 'light' regulation it is inevitable that banks will fight back and threaten additional charges -as they have through the BBA.
If regulators actually carry out their brief to protect consumers from unfair practices the next few months will be very interesting.
It will be a test of whether bankers have the power to 'take out' the threat to excess bank profits posed by regulators or whether consumers can expect fair trading in the future by better regulation.
Eddy Weatherill
Chief executive - IBAS
Independent Banking Advisory Service
Banking is of course not free, as those profit margins show, it's just that the charges are hidden, and in many cases, illegal.
I don't mind paying for my current account and transactions, as long as the banks also stop their dodgy activites, and are made to pay back the illegal charges they have made.
Bringing the charges out in the open forces competition out in the open, which might go some way to re-establishing normal returns.
Good to see they are making so much money and still can't help losing cheques we have paid into our business accounts and when you tackle them, the answer is Barclays did not lose it/them, they are lost during 'clearing', I was informed I should take a photocopy of every cheque paid in. The last cheque I paid in I made them promise me they would look after it. Fat chance. Time for a switch I think.
Darron
In view of this large profit is it not curious that I have just received advice that the monthly charge for Global Solutions, their on-line banking service is being now increased by 33%?
Some people are forgetting that the profits Barclays have generated are vastly geared towards the investment banking and fund management arm NOT Mr and Mrs Joe Public with personal bank accounts suffering overdraft charges and credit cards suffering the same. I would hazard a guess that this constitutes less than 5% of the 拢7.14bn headline figure.
Some people are forgetting that the profits Barclays have generated are vastly geared towards the investment banking and fund management arm NOT Mr and Mrs Joe Public with personal bank accounts suffering overdraft charges and credit cards suffering the same. I would hazard a guess that this constitutes less than 5% of the 拢7.14bn headline figure.
"Just because Barclays generates big and rising profits does not mean it is ripping us off"
No - but the return on retail banking gives a clue. And the thousands of people winning back the excessive charges from banks is a strong indicator that rip-off has been part of the banking culture for years. Since the mass redundancies of the late-80s/early 90s, is my estimate.
Looking into the detail, most growth for barclays is overseas. Now what does this mean.
This means places like developing countries where legislation is not as good as UK. They don't have any Financial Regulatory authority or it takes the back seat against economic growth.
Now who pays, the poor people in developing countries and who makes the money the dividend holders of the western world. Now is that FAIR?
Sometimes, western world should see life from the other side!!
As an employee of Barclays (and on the ground floor seeing customers regularly), I am proud to work for a successful British company making it's mark. We must stand tall to remain independent (unlike a number of our industries) and prevent overseas takeovers. The vast majority of customers enjoy free current accounts, debit cards, transactions, cheque books and other related services free of charge, what other industries offer services at no cost to the customer? We are a business after all and these all come at a cost to the Bank. Overdraft facilities prevent unauthorised fees and the Bank is helpful in ensuring customers are advised when a fee is charged (and offering refunds to first time chargers in some cases). The Bank's product offerings are competitive in the market place and offer value for money with unrivaled access through many delivery channels. I maybe accused of bias but truly believe that we all, as a nation, should stop bank bashing and start supporting a very succesful sector. We do make mistakes but do our best to sort them out as quickly as possible. The sheer numbers of customers and transactions mean not everything is going to work out perfectly. How you are treated following a complaint is how you should judge your Bank. Our profits need to be looked at broken down into their respective parts (of the business) before being criticised and think what contribution we are making to this country as a whole.
Retail Banking is highly competitive and strictly regulated. There is little room for profit so many banks charge fees. While banks are driven by greed they are essential part of economy - lending money and absorbing shocks of bad loans etc.
Another point that Banks don't share profit:
1. They prevent general crowd from investing in high profit instruments.
2. Profit unevenly distributed through bonuses rather then dividends to share holders
3. Executives entitled to lion share of bonus pool.
4. Excutives of one organisation are board members of another, so there is often conflict of interests, they are happy to vote down dividents in favor for bonuses and reinvestements.
BTW
Most of these issues common to all financial companies not just banks.
Nothing lasts forever,except it seems the generosity of Barclays retail customers to the cause.....
A good balanced article that is a reflection of the Major Banks as a whole. Most of them realised many years ago that there is no money in basic bank accounts thats why added value accounts were introduced.
They have also encouraged the cross selling of their own product ranges which again increases income. All of the main banks have profitable business and Corporate Banking arms that as the article suggests do support the nations businesses. Where do you think new start up businesses or companies increasing their workforce to cope with expansion get their money from?
The momentum is gathering pace regarding illegal? bank charges but in doing so will only force the charges to be collected off every customer to pay for the ones that abuse their accounts. If you do not want to pay charges or interest then stay in credit, cancel payments rather than have them bounce or save up rather than borrow. Simple.
Have to disagree with Chris. Banking, for personal customers, is indeed free. Having never in 35 years of banking with Barclays exceeded my overdraft limit, I have never once been charged, and my banking is virtually free. Cards are issued free, statements, cheque books, all free - access to cashpoints. The problem is that people have been spoilt, and now see free banking as a right, which it isnt. Barclays Bank is not a charity. If you object to what they are charging you, go elsewhere. You dont have to be Einstein to work it out.
Why do people still wonder why banks make such obscene profits? It must be because so few people don't understand concept of fractional banking....
Clearly if (as a bank) I am able to lend out 10 times more money than I receive in deposits, then I will obviously make make huge amounts of money through interest charges on loans during an economic boom. However, once people begin to default on their loans (perhaps we are seeing this happening now!) then confidence in the banking system starts to wane and you get a run on the bank as people try to get their money out......as has happened time after time in history and even as recently as 2001 in Argentina (El Corralito) when the banks simply shut the door and refused to pay back deposits.....because clearly there was not enough money held in reserve...
So, when banks get into trouble they simply call on the lender of last resort....i.e. the central bank.... to re-inflate the economy by printing more money and lending it at low interest rates. And so the boom/bust cycle goes on and on....
This is permitted only by the fact that the global economy now operates on the basis of FIAT currencies backed no longer by gold but by future tax revenues. And so the value of your dollar/euro/pound is debased further year on year....
If only people were capable of understanding what governments and bankers have really done to our money in the last 100 years then there would probably be a revolution by the morning......
This is also good news to those charities that benefit from Barclays policy of giving 1% of its pre tax to the communities in which they operate. In Africa where I am based, it means a lot!
it may sound like greed but at least in the case of Barclays, we know that some of that money will be spent making a difference in the lives of vulnerable groups in Africa.
Why do people still wonder why banks make such obscene profits? It must be because so few people don't understand concept of fractional banking....
Clearly if (as a bank) I am able to lend out 10 times more money than I receive in deposits, then I will obviously make make huge amounts of money through interest charges on loans during an economic boom. However, once people begin to default on their loans (perhaps we are seeing this happening now!) then confidence in the banking system starts to wane and you get a run on the bank as people try to get their money out......as has happened time after time in history and even as recently as 2001 in Argentina (El Corralito) when the banks simply shut the door and refused to pay back deposits.....because clearly there was not enough money held in reserve...
So, when banks get into trouble they simply call on the lender of last resort....i.e. the central bank.... to re-inflate the economy by printing more money and lending it at low interest rates. And so the boom/bust cycle goes on and on....
This is permitted only by the fact that the global economy now operates on the basis of FIAT currencies backed no longer by gold but by future tax revenues. And so the value of your dollar/euro/pound is debased further year on year....
If only people were capable of understanding what governments and bankers have really done to our money in the last 100 years then there would probably be a revolution by the morning......
All this talk about free banking is rather tedious. There is no such thing. Banks pay no interest or at best nominal interest on deposits in current accounts and then lend the amalgamated deposits out at market rates. The spread is their payment for "free" banking. Show me a bank that pays market rates of interest on current account balances and provides services without any further charge and then we will truly have an example of free banking
Why are people so obsessed with the so-called illegal unauthorised overdraft fees? It all seems very simple to me - as an example, the last time I went in to a shop there was a big sign that states "shoplifters will be prosecuted" - therefore if I steal something, I could be jailed.
By the same definition, if a bank customer spends too much money and creates an unauthorised overdraft, he is therefore stealing money from the bank - a 拢30 charge seems a good deal compared to a custodial sentence!
Could people please either manage their money better, since it only takes a bit of common sense, or can the government change the law so that anyone stealing money or having cheques bounced face criminal charges - this system works for the French so why not us.
Well now we know; Barclays is not in the banking business; it's in the wealth redistribution business. According to John Varley, without the bank's profits pensioners would be poorer and the government wouldn't have the taxes to fund its programmes. So that's alright then - any level of profit is good 'cause in a round about way we get it back either in our pensions or better health. Except much of their profit is from our purses in the first place. And don't fall for the old "most of the profits is from corporate finance" line. The charges companies pay Barclays are funded by increased prices to the consumer.
I've a radical solution to save the banks all the redistributive costs. Let us keep our money in the first place by not charging so much.
The 拢 30 charge is not fair as it does not relates to to the cost of borrowing the money. I " borrowed "
拢 300 for 3 days The penalty becomes 拢 3650 if it were applied annually. If a thug on a sink estate charged that he would be arrested!
Fortunately Barclays agreed to waive the" charge" I think it is an unfair
term of trade to make these charges & the banks will indeed have to find other ways to make up the shortfall to their profits
Barclays, in common with the rest of the retail banking industry provides a service to the public. It is NOT however a Public Service, a principle that many people fail to grasp. If I use a service in whatever sector, I expect to have to pay for it. If I mismanage my finacial affairs why should the bank bail me out without charge? This profitable British company should be applauded for its success in a highly competitive Global industry and be thankfull that it makes such a great contribution to the Exchequer and the Nation's pension funds. Bank of America has been widely rumoured as being interested in buying out Barclays and is unlikely to be discouraged by these results. I wonder how much better these detractors will feel when the ownership, management and profits of yet another successful British company are transfered to the USA. You wont find Americans complaining about profits, they are their life-blood. Get real!
Congratulations Barclays. Surely big profits means loads of corporation tax, big saleries and bonuses means loads of tax at 40%. Increasing dividends means I can finish my extension and put more money back into the economy. Everybody is a winner. Whats the problem?
McFly, I am interest to know, how does Barclays make a 39% return on capital on a free service? As Barry says, one way is not paying interest: a current account with an average of 500 pounds makes 拢25 p.a. for the bank if lent out at 5%. As others point out, the same 500 pounds lent out as 10 overdrafts of 50 pounds each for a few days, makes in excess of 5,000% interest. Now the scale and cost of each activity is different, but I'm pretty sure I know which one is more profitable!
A zero interest zero fee price for banking is a "one price fits all" situation, regardless of the bank, regardless of the customer. It's difficult to see how it can be the natural result of a competitive market. Rather I believe it is convenient for banks, because it breaks the link with cost and interest, the bank claims paying interest on current accounts is not economical because of the costs. Who's knows? The 39% reward would indicate it is. Only those fees that people pay occasionally and probably don't plan to pay (e.g. overdrafts) appear to attract a hugely disproportionate charge.
This cozy club needs to be broken up so that people can compare one bank's actual charges with that of another, and force out excessive profits through healthy competition. Firstly, fees that are massively disproportionate to cost need to be paid back. Secondly, what about forcing banks to pay interest on current account deposits, say risk-free interbank rates (this is the minimum the bank can earn on the money). That would focus the minds on declaring the remaining costs to customers, and real competition would follow. We've got a minimum wage, why not a minimum interest rate?
"Just because Barclays generates big and rising profits does not mean it is ripping us off, no matter how grumpy you or I might feel about what we feel is an unjustified bank charge or the length of the queue in a local branch.
An assessment of whether its profits 鈥 or those of any company 鈥 are excessive depends on an analysis of how much competition it faces and what kind of risks it is running".
Whilst on the surface it may appear that there is plenty of competition in the retail banking sector, just how "different" is that competition? They are all much of a muchness, I'd say. Okay, the odd ones stand out for paying a better rate of interest on current accounts e.g .Nationwide, but could that possibly be because they are a mutual? A few others here & there pay headline-grabbing rates or have a lower overdraft interest rate but they either don't last or are simply clawed back in another area of their business.
The reality is that the retail banking sector operates in a near-cartel climate. For example, despite penaly charges being unlawful & shown to not accurately reflect the real costs invloved, not one retail bank has moved to introduce a charge that is in keeping with the costs. Not one has admitted the charges are unlawful. And they all continue to charge broadly the same penalty figure. Did they all arrive at that amount independently? Unlikely.
And for all those who keep pointing out how great Barclays & the others are for providing free banking, wise up folks. 0.2% on your current account is how they pay for the "free" banking. Passing on rate rises early & rate decreases late is how they pay for it. 拢30 a letter is how they pay for it. Charging 拢30 for exceeding your overdraft by 拢20 is how they pay for it. It's YOUR money they use to pay for it. Nothing's for nothing - the cost is just hidden.
I have nothing in principle to paying 拢30 for breaking the terms of the account, whether that reflects the true cost to the bank or not. It's spelt out in black & white. If you don't like it don't break the terms. Call it a tax on stupidity if you like, because that's pretty much what it amounts to. Just don't lie to me about it.
Whilst reading through all the comments I have to say that a few I agree with but many I disagree with. The agreeable comments seem to be written by those who have a decent grasp of economics and what banking truly is. The Uk does have and for a long time has had a free personal banking service. I agree that charges are excessive but they are fundementally correct. Every contract I have ever entered into has penalties for breaching its clauses and this is exactly the same with banks. If they didn't penalise you then how would they act as a deterrent. The vast majority of people that are affected cannot manage their finances effectively and do not have some sort of 'rainy day fund' to cover a tough month or unexpected expense. The one month that they are financially stretched by an extra few pounds that they get a charge. This should be a lesson, fix it and don't let it happen again.
If anyone bothered to check the market for current accounts at the moment they will see that there are many banks offering better than 0.1%/0.2% on deposits. For instance the Halifax High Interest Current Account, at 6.17% Aer. I'd personally say that this is a pretty good rate. If your bank doesn't provide a similar rate then you should switch, to be fair nowadays the banks will do all the work for you. Personally I think that it is laziness, if people researched into their banking and finances they would find many better deals out there. I have no intention to stay with any bank or institution for any amount of time if there are better deals in the market place.
What is the problem with banks making profits? They may be excessive but they are Plc's and there whole business model is geared towards one thing, yes you've guessed it, making profit. If they didn't make profits they would not exist, just the same as any other company. As said many times previuosly, they are not charities, they exist to provide a banking, lending and investment services.
Anyways, I say cheers to free banking whilst it lasts, it certainly makes me more than it costs me. Also, i hope that the banks continue to make more profits, as the share price will rise and they will improve not only mine but a lot of people's pensions.
barclays have just charged me 35 pounds for NOT paying a direct debit..so glad to contribute to the bonuses, taxman, shareholders, pension funds etc.
But please, don't tell anyone Barclays are not ripping people off. In fact, a new verb: " to barclay someone", could well become in vogue when trying to describe rip-off bank charges...I've been barclayed !
In reference to illegal fees, they illegal full stop if its in the t&c and/or the customer misuses their account is totally irrelevant it is breaking the law. A small firm found to be doing this would have been fined and stopped right away but been banks they are tougher to deal with. Charging everyone a fee for using their account as long as its reasonable is fine as it spreads the cost evenly amongst everyone rather then just the poorest in society but I expect the fee would be too high and be excessive as the banks would see it as a way to increase profits further.
On the point of overdrafts, I have in the past asked for an overdraft when I knew I had a payment due to come out and a cheque was waiting to clear, I would have been overdrawn by under 拢20 and I only asked for a temporary overdraft, the money going in was over 10 times this amount and from a source that had never ever bounced, the bank declined the overdraft and tried to sell me an expensive loan instead so this talk about overdrafts been a soultion is rubbish. Its about time the financially excluded stopped been trampled on. Illegal penalty fees really also should be made to be refunded by default to avoid all the costs of people using courts time for claims.
Barclays just charged me 拢30 for going 拢5 overdrawn so right now I fell pretty resentful of their obscene profits.
Ian,
Write to them to get it back. More people need to do this, even though the momentum is gathering it is still not widespread enough for the Banks to really feel the impact.
Everyone else,
People who keep on about losing free-banking are just open to suggestion from the Banks and the BBA, they use this view as a way to make customers turn against each other and create a 'them and us' attitude.
What everyone needs to remember is that these fees are unlawful, full stop. I would urge anyone who has suffered them to claim them back, I have and the bank's lack of resistance is a testament to their guilt (even though they deny it)
All these complaints about bank charges, as someone in the front line, time and time again, customers feel its the banks responsibility to run their affairs. It amazes me that people can not track their bank accounts effectively enough so as not to go overdrawn or not to go over an agreed overdraft limit. Maybe, although this maybe asking too much, customers predicting that they may have difficulty in paying that sky ddr next week and perhaps even letting their bank know so a limit can be applied or increased to prevent the fees and inconvenience. Banks sends statements monthly or more frequently, offer online and phone access, and a branch on most major high streets. Come on customers, stop blaming the banks, manage your finances better, ddrs come out same day every month! And talk to them before the problem, not after! Fees are for breaking the contract, all this moaning and we will all be paying the price with an end to free banking. As someone who has never paid a fee, I wont be too chuffed to pay for everyone else's mismanagement and overspending.
Where would you rather put your money -
The bank that makes 拢7bn profit or the bank that makes no profit?
Thought so...
Yes, congratulations to Barclays. Yes, banks need to make profits, they are not charities. One has to however realize that there has to be some moderation in earnings and charges. The penalty charges are ridiculous. One should realize that while larger profits mean more money for the economy, they also mean inflation, thus an increase in expenses. Further, inflation means that people that are on benefits and "Career DSS" people need to spend more on food and clothes. When a bank charges 拢30 for a penalty charge to somebody on benefits, that is a lot for the person, especially when they go overdrawn by a few pounds. If they moderated their profits by making limited penalty charges and slightly increased interest, their profits may go down by 10%, then if they reinvested the money in free bank machines and community initiatives more people would have money to invest, meaning they would make more. It's simple business!!! I have personally claimed for people on a small commission basis over 拢50,000 of bank charges in the past 2 months! That is ridiculous!
Three issues:-
1. Large profits(not just UK and retail market earned)long been and interesting debate. Are the % returns any greater than any other sector with not such a large headline figure? A lot of stakeholders (shereholders, pension funds, staff, inland revenue etc) for it to be distributed around.
2. Current account/credit card charges.The momentum is gathering pace regarding (illegal?) bank penalty charges. Everyone signs up and agrees to these within terms and conditions and agrees to keep their account in order and not abuse facilities given (issue of cards, overdraft limits etc). Abuse these, then you pay the charges - are very well known so ignorance is not an excuse. Apply some integrity and decency you normally do not incur any charges - I have not paid a penny in 26 years of banking. I would be extremely embarrassed to admit over a few years I had incurred charges in excess of several hundreds of pounds which speaks loads for that person! Change these charges and in doing so will only force the charges to be collected off every customer to pay for the ones that abuse their accounts. If you do not want to pay charges or interest then stay in credit, cancel payments rather than have them bounce or save up rather than borrow. Very simple.
3. Insolvency - yes probably some irresponsible lending but also irresponsible borrowing (just because your car goes over 100mph doesnt mean you have to break the speed limit and it is the car dealers fault for selling it to you when you get fined!). Take responsibility, dont spend what you havent got or can afford to repay, lead your appropriate lifestyle according to your finances. I know some people in IVAs who seem to be maintaining their very expensive lifestyle and nothing has changed other than happily letting their creditors pay for their mistakes and their previous luxuries.
REMEMBER - someone's gain is always somebody else's loss!!
Well done to Barclays for being a successful British company!
People are obviously upset however about the huge profits Barclays (and indeed the other banks are likely to announce shortly) and feel that these profits are being generated from "unfair" overdraft charges. But lets look at the facts -
1. 17% of Barclays profits come from UK Retail Banking
2. Half of the total profits comes from business outside of the UK
3. UK Retail Banking encompasses everything from everyday current and savings accounts to mortgages. More people are choosing to bank with Barclays on these fronts so of course profits are bound to rise. On a 25 year loan (which is all a mortgage really is) the banks make most of their UK retail banking profits
4. In 2006 Barclays paid around 拢2bn in tax. This year, with the increased profits, this will be more. That 拢2bn goes towards funding schools, hospitals and roads and all the other stuff Mr & Mrs Jones income tax goes to fund.
5. Barclays also gives a sizeable chunk of its profits away to charity, both here and abroad. The "Spaces for Sports" programme is designed to get youngsters active through sport and provides money to develop parks and leisure centres that the whole community can benefit from. Thats just one example of how Barclays gives its profits back to the wider community.
As for the free banking in the UK, Barclays CEO John Varley has been on various media outlets this week talking about the profits generated and he has repeatedly said that he is commited to keeping banking free in the UK for Barclays customers. In fact, on Radio 4 he said:
鈥淚鈥檓 committed to free banking because I know that it鈥檚 one of the things that our customers value most and I鈥檓 very determined that we should protect it.鈥
The "unfair" bank charges that seem to be the bread and butter of tabloid journalism like "Tonight with Trevor McDonald" are completely transparent, fair, and avoidable. All you need to do is make sure you are spending within your limits. If the bank are forced to lend you money without first agreeing it, why shouldn't there be a charge for that?
People also seem to forget that things like bank charges go down on your credit history report. If you keep your account in order, do not exceed your overdraft limit then in the future when you need a little help from the bank (whether it be an overdraft increase or a loan) then they are much more likely to lend you that money. If they bank looks at the way you run your account and you a getting charges quite often, then when you come to ask for a loan they'll just view it as "You can't seem to live within your current limits as you are repeatedly getting charged for exceeding these. It would be risky to lend you any more money because we can't be sure we would get it back". As said in many of the previous posts, the banks are not a charity and this is how they do, and always have done their business.
If you don't like how your bank does its business, stop moaning and change to another bank. If people vote with their feet then the banks will be forced to change the way they do things. But the fact of the matter is that banking in the UK is among the most competetive in the world and many of the services you take for granted (withdrawing funds, paying in cheques, transfers etc) are free where they would be charged for elsewhere. It is not a god given right to expect the banks to give their services and time away for free so don't expect them to.
I am wishing the bank good luck but bee fair to you customers i mainly agree to some of the 37 letters from
customers.
jacob
I see a lot of posts say that you shouldn't expect banking for Joe Citizen to be free. I agree, but note that I am not getting it for free, although I am not being openly charged unless I exceed my overdraft. Lets say I earn 拢30k per annum which goes straight into my current account. With providence lets say I always have 拢100 left at the end of each month and at the start 拢2500. So the bank have somewhere between those two figures to invest throughout the year. At a nominal 5% per annum the money they would get from investing this money, (and it doesn't sit in limbo), is somewhere between 拢5 - 拢125. It is obviously nearer the lower figure, as to keep too much in a current account is lunacy. One can see why a letter from the man in the wardrobe might be charged so high, to act as a dis-incentive, as to go overdrawn will bring the average figure down. I look to others to say how much it costs to run the current account side, which has to be set against the millions of customers paying 拢5+ for their charges.
Obviously Dave Mitchell loves Barclays so much. I wonder why ?
Plenty of other UK businesses are successful and pay huge amounts of tax without ripping their customers off with unfair charges.
Change to another bank if you don't like it ??? That's a huge part of the problem, isn't it ? All the banks operate like a cartel, with amazingly similar over-pricing. For example, banks are not supposed to make a profit on charges for clerical work. Experts have assessed that it shouldn't cost more than 4 pounds 50 to stop a direct debit, but BARCLAYS and others charge around 35 pounds.
I guess Mr. Mitchell has never been "barclayed" like thousands of others.
In response to L Stenner, do you have any comprehension of business?? Despite most companies being 'happy' with their 3-9% profits, do you not think they dream of making more?? Companies don't get to a certain amount of profit and then think, 'oh well, thats us for the year, I think we'll stop making money now', do they?? They strive to make more and more money, hence business, not charity. Fair play to Barclays and all the other banks that have made huge profits; they are simply successful businesses, which (as we have seen), can cause envy and bitterness.
"Well done to Barclays for being a successful British company!"
Interesting. The majority of the top management in Barclays is American and their working practices are becoming more and more profit driven. They may still offer free banking, but their retail banking staff are driven to sell accounts with a monthly fee, whilst other staff are trained specifically to maximise fee income. Rarely now are the customers or staff mentioned in business focus, merely profit.
This is good news for the share-holders, not the customers.
Barclays is on its may to building the best Bank in not just the UK, but the world.
If you look at the breakdown of their profits, you will see that charges for Personal CUstomers makes up a small amount, while business and international are up the top.
Barclays is also one of the few banks which uses "pre approved limits" (obviously subject to an application) so as long as everyones details are up to date, there is no chance of miss selling. Barclays is also one of the cheapest for Bank charges. Barclays can only charge up to three times in any one month, which may seem quite a lot still, however when you compare it to other banks they're being very leniant. Barclays is also very good at helping customers in debt, and the amount if debt Barclays wrote off over the last year, and then to come out witht hat result, truely does make them a superb bank. Yes, people may not like it, but Barclays is a business just like any other, and what are business' looking to do? Make money whilst keeping customers.
As a former Barclays employee I can testify to the fact that the biggest problem in the retail division comes from the constant changes to the OD structure that leaves frontline managers struggling with all that comes from that constant uncertainty and flux.
Indian call centres may be a cause of concern to customers, but their relatively successful roll-out is nothing compared to the major UK contact centre sites, where the constant churn of staff suffer from management incompetence on a call-by-call, daily basis.
The mix of hastily employed management staff combined with the embittered veterans who would struggle to command half their salary in another business means this business can never realise the revenue potential that long-term customers willingly provide as they don't have the wits about them to look at the full market options.
If Barclays doesn't realise the error of it's ways it'll lose the high street presence (already under suspicion due to the incompetence/inexperience of frontline staff/management and appalling mr results) and unless it, the bank, solves the problems of middle-managemnt folks who are simply not fit for purpose, why not abandon the retail sector altogether?
It seems today the retail presence is little more than a staging post to give a greater credibility to the 'proper' divisions that actually make money and employ people of capability...and make a genuine effort in comparison with the UK retail division.
The headline profits mean nothing unless drilled down to specific business areas...though they are a handy investment tool when you combine that with the knowledge of when staff share benefits are drawn down...again amateurish action by the bank that we can all read into without even getting out of bed in the morning!
"For the greedy man there is never enough"
I think I must be one of the few people who feels like vomiting when i hear that one company is making so much money, and for what reason exactly? To improve the lot of the only thing that matters on this planet, it's people, or to concentrate wealth and power in the hands of a privileged few?
And why do some people get all patriotic and proud that it's a UK company?! Does it make you feel good to know that UK banks are expert at accumulating so much at the expense of so many? Proud that those billions aren't being used for a noble cause? Proud that Barclays ripped you off so successfully?
Quick, break out the bunting, let's throw a street party!
Red is just another cynical money making scheme. I mean, who really thinks we can help put a stop world hunger and poverty through consumerism and capitalism?! These two models are the reason why so much of the world's wealth is concentrated in the hands of so few, rich people in the first place! And then they have the nerve to come to some of the very people who made them so rich and ask you to donate more.
I am a Barclays customer and in my experience Barclays places its own interests ahead of the customer. I have no objection to them making [obscene?] profits provided I receive a decent level of service in return.
For the last few years the level of service has declined markedly and is no longer value for money and Customer Services are useless.
Re. the overdraft thing - if credit cards have software that is clever enough to block use after the limit has been exceeded, why can't my regular bank card do the same?
"why can't my regular bank card do the same? "
errr... could it be because at 35 quid a pop it suits them not to?
I am 25 I opened my Barclays Bank account when I left school and my Barclaycard account 2 years later. I have never been overdrawn I have never made a late payment to Barclaycard and I have all the insurance Barclays have sold me. On the 4th of May this year I paid my Barclaycard account at Barclays in Notting hill with a cheque made out to barclaycard from my employer 拢1,196. I handed over my Barclaycard bill filled in, the girl stamped it wrote clearly 拢1,196 and I left -- when checking my Barclaycard account online a few days later I realised that the cheque had gone through as 拢11.96p when I went to the bank with the reciept to complain they told me they were very sorry they accepted that it was their mistake but they told me I would have to get another cheque, as it could take weeks for them to check with Coutts due to data protection act problems. They said they would pay my minumum payment for me (late now) but that is all they could do. I am just an ordinary working girl trying to pay my bills, they are a huge bank worth billions and I can't trust them to honour my payment when they accept that it was their mistake. I am very upset with barclays I have all their insurance but I can't insure against barclays incompetance.