- Date
- 25 February 2024
Full Disclosure:
Interest rates cause bank profits to rise
By Jaysen Sutton |
Hi Reader 👋🏽,
The Story: HSBC experienced a sharp decline in its share price last week despite announcing an almost 80% increase in profits before tax. Meanwhile, Barclays’ shares rose 11% despite a 6% drop in profits.
What you need to know for interviews: The rise in interest rates have led to record profits for UK banks. This is a result of higher net interest income, as banks receive more interest on loans compared to the interest they pay on deposits.
So what’s up with the market's reaction? Importantly, it’s all about expectation. In HSBC’s case, investors were concerned by the bank’s writedowns in China. Investors are worried about China’s property market following the collapse of Evergrande, one of its largest real estate developers. In Barclays’ case, the market responded positively to its promise of a new plan, including a major push to cut costs and £10bn in returns to shareholders over the next three years.
Impact on Law Firms: Banks typically appoint a panel of law firms as external counsel to advise them on their various legal needs. By appointed a panel, a bank might expect certain flexible fee arrangements or a more bespoke service.
HSBC refreshed its legal panel in 2021, with advisers including Norton Rose Fulbright, Linklaters, DLA Piper, Clifford Chance, Simmons & Simmons, and Pinsent Masons.
The bank is also increasingly working with alternative legal services providers (ALSPs), which are non-law firms providing legal services. Last month, according to The Lawyer, HSBC appointed seven businesses on its first ever ALSP panel, including Ashurst Advance and Deloitte Legal.
Barclays called for the end of the traditional legal panel in 2018, opting to rate law firms on an ongoing basis on metrics like billing rates, thought leadership and technology.
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