Q3 financial reports of major UK banks highlight intensified competition for deposits

The focus of the third-quarter financial reports from major UK banks is not bank taxes, rising interest rates, inflation, or artificial intelligence, but rather deposit competition. According to UBS analyst Jason Napier during Lloyds Banking Group's financial report conference call, deposits have become "the number one issue investors are most concerned about." Other analysts even apologized for repeatedly asking about deposits. The financial reports from various banks highlight the fierce level of deposit competition. In the three months ending September 30, Lloyds Banking Group saw a reduction of £300 million (approximately $403 million) in UK retail savings deposits. NatWest Group's private banking and wealth management business also saw a decline of a similar magnitude in deposits. Barclays' UK corporate banking deposits fell by £2 billion compared to the previous quarter. HSBC Holdings said that one of its key profitability indicators remained stable, but new competitive pressures on customer deposits in markets such as the UK offset some of the positive effects. Deposits are a source of funding for banks with lower costs than the wholesale funding market. Wholesale funding refers to banks borrowing from channels such as institutional investors. Banks use deposits to issue loans and generate income from them. A decrease in deposit size means that banks must either issue fewer loans or bear higher funding costs.