Lloyds Bank’s chief executive has asked Labour and the Government not to impose a windfall tax in his industry, citing “nervousness”.
Charlie Nunn is the chief executive officer of Britain’s biggest lender. He said that politicians need to state clearly their banking policies ahead of an upcoming election in 2013.
Mr. Nunn said that international investors are worried about UK plans because Spain and Italy increased taxes on banks. Labour is a strong contender in the polls. However, there are growing concerns that it may adopt similar policies if elected.
Mr Nunn said at the Global Banking Summit that “the real desire I have, and our shareholders have is clarity so that banks can continue operating effectively to support their customers and continue to create safe returns for their shareholders.”
Rachel Reeves, the shadow chancellor, has refused to endorse a policy that would give banks a windfall. She said in the summer that she wasn’t “convinced by the evidence” and therefore did not support the policy.
Mr Nunn’s comments, however, suggest that the industry would like her and Chancellor Jeremy Hunt go further and explicitly exclude a windfall profit tax.
Investors are worried about tax policies on banks after the disastrous implementation of a bank-tax by Italy in August.
Italian Prime Minister Giorgia Meloni introduced a new levy on August 1, which caused the share prices of local banks to decrease.This forced the government to rethink and soften the plan.
UK banks already pay several taxes. These include the bank levy, which is based on their balance sheet, and a bank surcharge based on their profits.
The Government reduced the bank surcharge from 8pc to 3pc last year, claiming that it was needed to make UK banking more competitive internationally. Despite this, the rising interest rate has boosted profits for some banks and led to calls for higher tax.
Positive Money, a group that campaigns for a levy, has said a levy against HSBC Barclays Lloyds and NatWest would raise anywhere between £5bn and £20bn. Last year, interest rates were a major factor in boosting profits for banks. High levels of switching by customers in 2023 have forced banks into offering more competitive rates for savings, which has eaten away at earnings.
Barclays, which is targeting a £1bn cost reduction target, has revealed that Mr Nunn made his comments at the same time as Barclays was considering plans to cut thousands of clients out of its investment bank.
The bank is planning to terminate relationships with customers who do not produce enough profit for them as part of its restructuring plans next year.
Governments, hedge funds and fund managers are among the clients who could be cut off.
Barclays Investment Bank has around 10,000 corporate clients, and it is anticipated that up to 2,500 of them may be removed.
Venkat is a executive who has been working on a restructuring project codenamed Project Minerva. This move is just one of many options he’s considering.
After a steep decline in its share price, the bank has been under pressure to turn around its fortunes.
Venkat will announce his shake-up formally in February. It is expected that the focus of this announcement will be on cutting costs and increasing shareholder value.
It is possible to quickly free up money at the lender by dumping customers who are less profitable. Barclays could spend more money elsewhere if it cut ties with clients who are less profitable. According to reports, dumping clients could release assets worth up to £20bn to be used elsewhere.
The value of HSBC is £116bn, a far lower valuation than its competitors. The bank is dwarfed in size by Wall Street giants.
Last week, it was revealed that the lender wanted to cut back office jobs within its HR, Legal and Compliance functions in order to save money.
Up to 2,000 rolls have been designated for the chop.
Barclays employs approximately 87,000 people around the world, including 44,000 in the UK.
Venkat had to take action in the first half of this year, after its share price fell again due to disappointing results.
Barclays investment bank competes with Goldman Sachs and Morgan Stanley to provide a range of services, including M&As and share trading, for large corporate clients.
Unlike HSBC its exposure to the fast-growing Asian market is minimal.
The investment bank was the focus of radical shake-ups in the past. Activist investor Ed Bramson tried unsuccessfully to force the bank several years ago to spin off portions of the unit.
Barclays has declined to comment.