Rates of 0.25 per cent would be fine, it’s zero per cent interest we’re worried about, says Barclays
Barclays is not all that concerned about a 0.25 per cent interest rate. A zero per cent rate, on the other hand, could cause some issues.
Slotted away at the back of its half-year results, which were released earlier on today, Barclays has charted the effect movements in interest rates would likely have on its business.
Unfortunately, it takes a bit of deciphering to understand what it all means. Fortunately, Tushar Morzaria, Barclays' group finance director, later explained it to analysts.
"If I look at the general expectation of a 25 bps rate cut in August, we would expect to broadly offset that through further liability re-pricing with a slight time-lag, so Barclays UK net interest margin for the full year at around the second quarter level looks in the right ballpark," said Morzaria.
"If rates go below 25 bps, it would likely put modest downward pressure on net interest margin."
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And in a media briefing, group chief executive James 'Jes' Staley, added: "If [the interest rate] moves to zero then it begins to have some degree of impact."
Following the Bank of England's decision to hold the interest rate this month, a cut is looking like it's more on the cards in August.
However, comments from the Bank of Japan – which, in the early hours of this morning, opted to keep interest rates at minus 0.1 per cent, rather than cut them further – have given Staley pause for thought. He pointed out it seemed the central banks are "increasingly questioning" whether negative interest rates would have the desired effect.
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Staley added that Barclays had no plans in the pipeline to pull an RBS and write to business customers to advise them that they'd be charging for hold cashing should the Bank of England send interest rates into negative territory.
"At this point, we don't have plans to send a letter like that," Staley said.
Barclays' reaction is a stark contrast to that of Lloyds, which revealed it was culling a further 3,000 jobs and another 200 branches in its results announcement yesterday and the potential cut in interest rates was where at least part of the blame was pinned.
However, Barclays' business is much more diversified than Lloyds, with a substantial chunk coming in from the US.