The performance of the major UK banks should soften in 2023 after reporting strong results as funding costs rise, Fitch Ratings says in a new report.
This year, higher funding costs will become more visible following ongoing shifts from low-cost current accounts to higher-yielding term deposits.
In May, UK non-financial businesses deposited £9.8bn with banks and building societies in all currencies, according to data from the Bank of England. These were the first net deposits from UK non-financial businesses since August 2022. The effective rate on new time deposits rose significantly from 3.70% to 3.94% during the month.
In May, households withdrew £4.6bn from banks and building societies, compared to net deposits of £3.7bn in April. This is the highest level of household withdrawals on record since 1997.
Within the household deposits measure, the net withdrawals of interest-bearing sight deposits significantly increased from £5.4bn in April to £11.4bn in May. Non-interest-bearing sight deposits marked the seventh consecutive month of net withdrawals at £3.3bn in May.
More broadly, the net flow of sterling decreased to -£4.6bn in May, compared to £6.8bn in April.
