If you travel regularly for work or enjoy holidaying abroad, the right credit card could make a big difference. A rewards credit card which offers flight points could mean you cut flight costs – helping you save money on a holiday – or let you upgrade your seat for less.

There are several credit card providers offering airline or flight points as a reward for spending, such as American Express, Virgin Money and Barclays.

But which is the best credit card for flight points, such as Avios or Virgin Points? We break down the different options available right now, comparing what’s on offer, monthly or annual fees and any extra perks like airport lounge access or travel insurance.

What is an airline miles credit card?

An airline miles credit card is a type of reward credit card that lets you collect points on your everyday spending, which can then be used towards flights.

Once you’ve collected enough points or airline miles, you can typically redeem them – unlocking perks like free or reduced flights, seat upgrades, extra baggage, airport lounge access or even other travel expenses like hotel stays or car hires, depending on the provider.

Different airlines have their own schemes. The most popular ones are Avios, run by British Airways – which can also be used with BA’s partner airlines – and Virgin Atlantic’s Virgin points.

Are airline miles credit cards worth it?

Airline miles credit cards can offer lucrative rewards, particularly if you’re a higher spender or you travel often. They can make your journey more rewarding.

However, there are a few caveats. You can only redeem points with certain airlines or providers, and you will need to be flexible with your travel itinerary, as flights paid for with points tend to have limited availability, especially during peak travel times.

Keep in mind that you will have to repay your credit card bill in full each month, or you will be stung with high interest rates.

The best credit cards for flight points

Below, we round up the top credit cards for airline miles and reward points. We’ve done a breakdown based on annual cost, representative APR, welcome bonus and extra perks you can get.

American Express Rewards Credit Card

This is the most cost-effective travel reward credit card for customers, as it lets you earn points on your spending but has no annual fee. It comes with these perks:

• 10,000 Membership Rewards points when you spend £2,000 in your first three months. You don’t qualify if you’ve already had an Amex card in the past 24 months.
• Earn 1 point for every £1 spent on purchases.
• Earn 4,000 points for inviting a friend – provided their application is approved.

Membership Rewards points don’t have to be redeemed as flight points, but you have the option to transfer them to an Amex loyalty partner programme such as an airline’s frequent flier scheme.

For instance, 40,000 points could get you a return economy flight to Dubai with Virgin Atlantic. You can also redeem your points on eligible purchases at PayPal, Amazon, Boots, Currys, etc.

British Airways American Express Credit Card

Another cost-effective option is the British Airways American Express Credit Card. It doesn’t have an annual fee, and it lets you collect Avios on any purchases you make. Some of its perks include:

• 5,000 bonus Avios when you spend £2,000 in your first three months
• One Avios for every £1 spent on purchases.
• 1,000 Avios when you add the first Supplementary Card – an extra card issued to a family member or friend – to your account.
• Earn 4,000 points for inviting a friend – provided their application is approved.
• Get a companion voucher when you spend £15,000 each cardmembership year.
• Covered for Travel Accident Insurance of up to £75,000 on public transport.

You can redeem vouchers when booking a British Airways, Iberia or Aer Lingus Reward flight. We look at Avios-only flights and companion vouchers in a separate guide.

American Express Preferred Rewards Gold Credit Card

If you’re a frequent traveller and want more value for your money, the American Express Preferred Rewards Credit Card may be a suitable option. While it comes at a steep cost of £195 (£0 in the first year), it could be offset by the amount of points and rewards on offer. This includes:

• 40,000 bonus Membership Rewards points when you spend £5,000 in the first six months. This reverts to 20,000 points once the offer ends after 26 May 2026. You don’t qualify if you’ve already had an Amex card in the past 24 months.
• Earn three points for every £1 spent on Amex Travel, two points for every £1 spent directly with airlines, and one point for every £1 spent on eligible purchases.
• Four complimentary Priority Pass airport lounge passes a year at up to 1,300 lounges at airports around the world
• Get US $100 hotel credit when you book two or more nights with The Hotel Collection, which can go towards spa purchases, food and beverage, late check-out, room upgrades and more.
• Free Travel Accident Insurance up to £250,000 and Travel Inconvenience Insurance up to £200.
• £10 back per month on Deliveroo, or effectively £120 a year

American Express Nectar Credit Card

If you’re a regular Sainsbury’s shopper, you might find that the American Express Nectar Credit Card offers you the best value for money. It has an annual cost of £30, which comes in the second year, so you can trial the card for a year to see if it’s ideal for you. Here’s what you’ll get:

• 20,000 bonus Nectar points when you spend £2,000 in your first three months. You don’t qualify for this offer if you’ve already had an Amex card in the past 24 months.
• Earn 3 points for every £1 spent at Nectar partners, and 2 points for every £1 on purchases
• Invite a friend and earn 5,000 points if they are approved.

Nectar points can be converted into Avios – 400 Nectar points equal 250 Avios. This means the welcome bonus is worth 12,500 Avios.

Virgin Atlantic Reward Credit Card

If you fly with Virgin or are a banking customer of theirs, you may want to consider getting the Virgin Atlantic Reward Credit Card. It has no annual fee. The perks that come with this card include:

• 3,000 welcome bonus points when you make a purchase in the first 90 days.
• Until 18 May, earn another 3,000 Virgin Points if you spend £1,000 within 90 days of taking out the card. Make sure you link your Flying Club number to your credit card by 16 August to be eligible for the bonus.
• 0.75 Virgin Points for every £1 spent on everyday purchases, and 1.5 points for every £1 spent with Virgin Atlantic or Virgin Holidays.
• Get a flight upgrade or a companion ticket when you spend over £20,000 in a year.

We take a look at how Virgin Flying Club works in a separate guide.

Virgin Atlantic Reward Plus Credit Card

For higher spenders and frequent flyers, it’s worth checking out the Virgin Atlantic Reward Plus Credit Card, a premium version of the above reward credit card. The annual fee is £160, but this may be offset using Virgin Points. Here’s how you can earn them:

• 18,000 welcome bonus points when you make a purchase in the first 90 days.
• Until 18 May, earn another 18,000 Virgin Points if you spend £3,000 within 90 days of taking out the card. Make sure you link your Flying Club number to your credit card by 16 August to be eligible for the bonus.
• 1.5 Virgin Points for every £1 spent on everyday purchases, and 3 points for every £1 spent with Virgin Atlantic or Virgin Holidays.
• Get a flight upgrade or a companion ticket when you spend over £10,000 in a year.

Barclaycard Avios

If you fly British Airways and want to collect Avios, Barclaycard Avios may be a good place to start, considering it comes with no annual fee. Here are the perks you can get:

• Collect 5,000 Avios if you spend £1,000 in the first three months
• 1 Avios for every £1 spent on eligible purchases.
• When you hit £20,000 spent on your card within 12 months, you can choose between a British Airways cabin upgrade voucher to use on an Avios Reward Flight booking, or opt for 7,000 bonus Avios.

If you change from an existing Barclaycard to this one, you can still get 1,000 Avios when you spend at least £1,000 within three months.

For example, if you have collected 19,500 Avios points, by spending just £1, you can get a peak-time, economy return flight from London to Milan.

Barclaycard Avios Plus

For premium flyers and avid points collectors, the Barclaycard Avios Plus can mean you get more points and rewards on your travel. This is the most expensive card on the market, costing £20 monthly, or £240 annually. Here are perks that come with the premium card:

• Collect 25,000 Avios if you spend £3,000 in the first three months
• 1.5 Avios for every £1 spent on eligible purchases.
• When you spend £10,000 on your card within 12 months, you can choose between a British Airways cabin upgrade voucher to use on an Avios Reward Flight booking, or opt for 7,000 bonus Avios.
• Access to over 1,000 airport lounges worldwide at a discounted rate of £20.50 per lounge pass per person.

If you change from an existing Barclaycard to this one, you can still get 5,000 Avios when you spend at least £3,000 within three months.

For example, if you use 43,000 Avios points and pay £33, you can get a peak, Club Europe business-class return flight from London to Venice, Lisbon or Madrid.

Which is the best credit card for flight points?

If you’re new to credit cards and still want to make the most of your travel, you might want to trial a credit card with a £0 annual fee – or opt for an Amex Preferred Rewards Gold card, which is free for a year, to determine if the rewards are worth it.

If you’re keen on a companion voucher or flight upgrade without having to fork out hundreds, you can trial the Barclaycard Avios or the British Airways Amex card. We look at the best credit cards for airport lounge access in a separate guide.

According to Head for Points, the Virgin Atlantic Reward Plus Credit Card is “clearly the best deal” in the first year, given the boosted bonus. “36,000 Virgin Points easily offsets the £160 annual fee for the first year. More importantly, once you have the Reward Plus card, you are earning the superior 1.5 points per £1 whenever you shop. You also trigger the annual voucher more quickly.”

However, consider if you’re likely to use Virgin points before you apply. If you typically fly with British Airways instead, collecting Virgin points might not be right for you.

As per Which?, the Virgin Atlantic Reward Plus Credit Card is the most competitive, but its free version is more cost-friendly. The American Express Rewards Credit Card is a ‘best buy’ due to its zero annual fee and flexibility.

However, it’s worth remembering that based on your needs and preferences, one card could be more suitable than the other – so if you value premium services, you might be comfortable paying more to get value for money.

Major UK banks should be ready to join in a round of consolidation in European banking. The British economy is stagnant, competition from challenger app-based banks is intense, and the government is determined to tax businesses out of existence. A major takeover of a European bank would put each of them on the global stage, and if they got it right, could power their profits for a decade or more.

In the sector's biggest takeover offer for more than a decade, Italy's UniCredit tabled a $40 billion offer for Germany's Commerzbank, which it has been stalking for years. What happens next remains to be seen. It is very hard to win a hostile contest for a eurozone financial institution, and certainly one as large as Commerzbank.

UK banks should join a unified European financial system

A round of consolidation within European banking is inevitable over the next year. The EU has finally realised it needs a unified financial system if it is to improve its competitiveness. But hold on - surely the major British banks should be taking part in that process? True, Britain is no longer part of the EU. But it is still part of the wider European economy, even if officials in Brussels would prefer that it wasn't. If a major eurozone bank is up for sale, then they should be looking at it very seriously.

Firstly, it is the natural space for expansion. There is not much scope for takeovers within the British banking market, while the US is a very hard market to crack and Asia offers limited opportunities. By contrast, all the major European finance markets are geographically close. A takeover or merger would offer huge scope for cost cutting, while the leaner management that UK banks have perfected would mean it would not be hard to make their branches and loan books more profitable. Continental banks are not very efficient, so it should be possible to squeeze out higher profits.

Secondly, UK banks can afford it. All the major British banks have been racking up huge profits. Lloyds made £6.7 billion last year, a 12% increase on a year earlier; Barclays made more than £9 billion, a 13% rise; while NatWest, now finally fully private again, made £7.7 billion, an increase of more than 24%.

Commerzbank only has a value of £31 billion despite all the takeover speculation, and even Deutsche Bank is only worth slightly over £40 billion. There are plenty of banks across the eurozone that are now relatively small compared to the British lenders. They can be bought without taking on huge levels of debt, especially if a deal can be financed partly in shares.

Finally, the chance won't come again. The German banking industry has been struggling along with the rest of the German economy, but it will probably recover over the next decade if the country manages to restructure its industrial base. If you don't take over one of its major banks now, then soon it will be too late. You won't be able to afford them, and they won't be for sale anyway.

Likewise, the French economy has slumped, but it may revive, and so may the rest of the eurozone. Looking back, Switzerland's Credit Suisse was a major opportunity when it was rescued by UBS in 2023. The UK banks missed out that time around. It would be a shame to miss out all over again. This is a once-in-a-generation opportunity to double or more in size.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Every single branch of Nationwide and Virgin Money will keep its doors open until at least 2030, as they buck the trend of banks and building societies retreating from the high street.

Nationwide had initially committed to keeping its 696 branches (including Virgin Money) open until 2028, but has now extended its ‘Branch Promise’ until the end of the decade.

None of its branches will be closed during this period, with the building society confirming it applies even when both a Nationwide and Virgin Money branch are close to each other.

The commitment comes as 6,626 bank and building society branches have closed since January 2015, according to research from Which?.

Between the start of 2025 and the end of 2026 alone, almost 350 Lloyds, Halifax, and Bank of Scotland branches will close their doors.

Similarly, NatWest closed 53 branches in the first half of the year. Meanwhile, Barclays will close 99 branches, and Santander will close 95 branches before the end of the year.

Amid these closures, Nationwide says demand for physical banking services remains high.

In the 12 months to September 2025, there was an 11% increase in the number of customers using Nationwide branches, as 33% of current accounts and 22% of savings accounts were opened in a branch, according to the building society.

ATM usage rose by 5% in the same period, with a 17% increase of non-Nationwide customers using in-branch cash machines.

The increased demand for Nationwide’s physical banking services is especially high in the 133 towns and villages in the UK where there are no longer any other bank or building society branches.

In these towns, current account openings are up 29% year on year and in-branch ATM usage is up 25% overall, and 96% for non-Nationwide customers, the building society said.

Jessica Sheldon, deputy digital editor at MoneyWeek, said: “It’s so important customers can access face-to-face banking services if they need to.

“Banking is an essential service to many, including the most vulnerable, and while millions of people in the UK use online and mobile banking, IT outages can and do happen. It’s alarming to see how many bank branches have closed in the past decade.”

Why is Nationwide keeping its branches open?

In 2019, Nationwide first pledged to keep its branches open until at least 2026, and then renewed it to last until 2028.

The promise was also extended to include all Virgin Money branches last year after its acquisition of the bank in October 2024.

It has now renewed and extended its branch promise to 2030 as the building society says branch closures have a “disproportionate impact on vulnerable customers”. This can especially be the case for older people who rely on face-to-face services for baking support.

At the same time, the building society says younger people still rely on branches too as over one in ten new Nationwide student accounts were opened in branches this academic year.

Though other banks have justified their closures by arguing that many customers prefer to bank online and have instead diverted funds to digital innovation, Nationwide’s data shows that this is not the case for all people.

Dame Debbie Crosbie, group chief executive of Nationwide, said: “Our customers can be confident that they can bank with us whichever way they choose. Branches are important to our customers, to communities, and to the health of our High Streets. That’s why Nationwide will continue to keep branches open in addition to our investment in online and telephone channels.”

How to access banking services when your local branch is closed

It is becoming more difficult for some to access physical banking services amid the ongoing wave of bank closures.

Research by Which? in January 2024 found 30 parliamentary constituencies have no bank branch anywhere in them, leaving around 3 million people with no access to local face-to-face banking services.

If your local bank branch closes, you might consider moving to another bank or building society with a physical presence nearby. Some may have bank switching offers – for instance Nationwide currently offers £175 as a bonus when you switch.

If you cannot or do not want to switch providers, you can instead look at where your closest banking hub is.

A banking hub is a shared banking facility that lets customers from various banks and building societies carry out banking services like withdrawing or depositing money, making bill payments, or speaking to an adviser.

There are currently around 150 banking hubs in the UK, with plans to increase this to 350 over the next five years.

If there isn’t a banking hub nearby, another alternative is by using one of the 11,635 Post Office branches in the UK – most of these offer ‘everyday banking’ services such as withdrawals and deposits.

Barclays is offering new customers between £200 and £400 for transferring their current account.

The high street lender’s deal is the highest bank switching offer available on the market now. But in order to get the full £400, you have to jump through some hoops — and quickly.

The bank is also offering customers cashback via another incentive. Last month, Barclays launched a £500 cashback offer for ISAs, which you can still take advantage of, bringing the total potential rewards to a whopping £900.

While the £400 offer is attractive, you will need to have a lot of money in your account to qualify.

We look at what’s on offer and if you’re eligible.

Barclays’ new switching deals explained

You may be able to get anywhere between £200 and £400 from Barclays, based on which account you transfer your money to.

How to get the £200 Barclays switch offer

New customers can get £200 if they follow these steps:

• Open a Barclays Bank Account through the Barclays app.
• Join Blue Rewards for £5 a month.
• Complete a full switch, including at least two direct debits.
• Deposit a minimum of £2,000 within 30 days of opening the account.

Once you’ve followed these steps, you’ll receive the £200 in your new account within 28 days.

The only eligibility criteria here is that you must have at least £800 paid into the account every month.

The switching offer is only available until 27 November 2025.

With Blue Rewards, you can earn up to 15% cashback on everyday spending, better savings rates, and a free Apple TV subscription, usually worth £9.99 per month. Note that Blue Rewards has a £5 monthly fee.

How to get the £400 Barclays switch offer

New customers can get double the amount if they follow the steps mentioned below — but eligibility rules apply. You must:

• Open a Barclays Premier Current Account through the Barclays app.
• Complete a full switch, including at least two direct debits.
• Deposit a minimum of £4,000 within 30 days of opening the account.

Here’s the caveat, though. In order to be eligible for this account, you will need to have a gross annual income of £75,000 or have at least £100,000 in savings, eligible investments, or a mix of both.

Eligible investments include investment ISAs, SIPPs, or General Investment Accounts that are held with Barclays.

The switching offer is only available until 27 November 2025.

Are existing Barclays customers eligible for the bonus?

If you’re already a Barclaycard, mortgage or savings account customer, you can still get the £200 or £400 bonus by following these steps:

• Delete the Barclays app from your phone.
• Reinstall the app and register as a new customer for either a Barclays Bank Account with Blue Rewards or a Premier Current Account.
• Wait up to 48 hours for your new account to appear in the app.

If, for any reason, you’re unable to access your new account, contact Barclays for support.

Could you get £900 cashback from Barclays?

In September, Barclays launched a £500 cashback offer for customers who transfer their cash ISA to the high street lender.

There’s a caveat though: you can only get the full £500 if you transfer more than £100,000 to the new account. To do that, you’ll need to have a Barclays current account for the money to be sent to, and you must open it before 28 November.

While the £100,000 can come from multiple accounts, a few ISAs are excluded from the offer. This includes Lifetime ISAs, Help to Buy ISAs, and other Barclays ISAs.

After the transfer is successful, you’ll get the cash in your current account within 60 business days after 28 November 2025.

If you are eligible for both the £500 ISA transfer and the £400 bank switching deal from Barclays, you could get a total of £900.

Which Barclays account is better for me?

If you earn more than £75,000 or have at least £100,000 in savings or eligible investments with Barclays, it might be worth considering a Barclays Premier account, as it comes with a higher cash bonus and other perks.

We’ve broken down the deals on offer from both of the aforementioned Barclays accounts to help you compare.

The number of “green mortgage” deals available to homeowners is growing – but how do they work, and who qualifies for one?

Most high-street lenders now offer some kind of green mortgage. They are usually focused on the energy efficiency of homes, and there are two main types.

The most common approach is to offer those buying a property with a high energy performance certificate (EPC) rating, typically A or B, a slightly better mortgage deal. For example, a lower mortgage rate, cashback or a cheaper fee.

The other type is an incentive for homeowners who want to improve the efficiency of their property. This could be a preferential interest rate for additional borrowing to fund things like solar panels or heat pumps, or cashback once the improvements are complete.

Last year, Virgin Money launched a retrofit mortgage offering borrowers up to £15,000 cashback to go green. This has now been reduced to £10,000.

Nicholas Mendes, mortgage technical manager at the broker John Charcol, tells MoneyWeek: “Ten years ago, there were hardly any green mortgages. Now more than half of lenders have one.” According to Moneyfacts, there were a total of 765 green mortgages on the market in mid-August.

Research by the Green Finance Institute, which launched the Green Home Finance Roadmap in August to encourage sustainability across the UK mortgage market, found that half of all homeowners would use a green mortgage to help them buy or upgrade to a more energy-efficient home.

With house prices rising, it makes sense to see if you could save money with a green mortgage, particularly if you’re buying an energy-efficient property, or would like to make home improvements like adding insulation, double glazing or solar panels.

About 1.5 million dwellings in England now have solar panels – nearly 6% of dwellings – according to Nationwide.

We look at how green mortgages work, who’s eligible, and whether they represent the best deal on the market.

How do green mortgages work?

A common misconception with green mortgages is that they are more environmentally friendly than conventional mortgages, or that the lender is “green”.

However, the “green” in green mortgages refers to the requirements needed to qualify for the deal.

“It does not mean that your mortgage lender will be investing your payments into green initiatives or schemes,” notes Terry Higgins, managing director of TNHG New Build Mortgages.

About 80% of UK homeowners admit they are not familiar with green mortgages and the benefits they offer, according to a survey by David Wilson Homes.

Higgins gives the following definition: “Green mortgages are designed to reward people living in energy-efficient homes or people carrying out green home improvements, and they can come with various benefits, including cashback, lower interest rates, and potentially the ability to borrow more."

Note that green mortgages have lots of different names, such as Green Reward, Green Living Reward and Retrofit Mortgage.

Who is eligible for a green mortgage?

Green mortgages aimed at home buyers are generally only available for properties with an EPC rating of A or B.

Some lenders will look at the standard assessment procedure (SAP) rating – the methodology behind the EPC – to determine if a property is eligible for its green mortgage.

For example, Nationwide offers a Green Reward for homes depending on their SAP rating. Those rated an SAP of 86-91 will receive £250 cashback and those above 92 receive £500 cashback.

Some green mortgages are restricted to new-build homes that are energy-efficient.

Mendes says that eligibility is a barrier with these products. “Most deals are limited to EPC A or B properties, which means new-builds dominate. Older homes rarely qualify, with fewer than 10% of pre-1900 houses even reaching a C rating,” he says.

In terms of cashback rewards for homeowners making energy-efficiency improvements, you usually have to have your mortgage with that lender to begin with. If you want to install, say, a heat pump or solar panels, you can then look to see if your mortgage provider is offering any cashback.

Some lenders offer lower interest rates or even interest-free borrowing for customers that want to fund green home improvements.

Before applying, you’ll need to check whether your home improvement meets the eligibility criteria, as well as any other terms and conditions.

What green mortgages are available?

Some lenders offer cashback to home buyers taking out their green mortgage.

David Hollingworth, associate director at the broker L&C Mortgages, highlights HSBC, which offers £350 cashback for energy-efficient homes with an A or B rating, while Halifax applies £250 cashback. Nationwide pays out cashback of up to £500.

NatWest offers an improvement to the product pricing, often offering deals with the lowest rates but with reduced fees. For example, it currently offers a two-year fixed rate at 3.88% for purchases up to 60% loan-to-value (LTV) with a £1,495 fee. Those buying a property with an A or B EPC rating can have the same rate but with a lower £995 fee, says Hollingworth.

Barclays offers green mortgages for new-build properties. It has a green deal five-year fix at 3.95% to 60% LTV with £899 fee.

On average, green mortgage rates are lower than standard mortgage rates.

For homeowners making energy efficiency improvements, Nationwide offers interest-free borrowing for two years or five years on a loan worth up to £20,000 for eligible green improvements. This includes a boiler upgrade, solar panels, air source heat pumps, cavity wall insulation, double glazing or replacement windows, electric car charging point and loft insulation. You need to have a Nationwide mortgage to apply.

Meanwhile, Coventry Building Society has preferential further advance rates for eligible improvements.

Halifax offers cashback of up to £2,000 to existing mortgage customers that complete efficiency improvements with its Green Living Reward. The maximum is paid out to those installing a heat pump, £1,000 cashback is paid out for solar panels or a battery, while £500 is awarded for other energy-efficient home improvements.

Virgin Money’s Retrofit Boost Mortgage is slightly different as it involves taking out a mortgage, with a higher interest rate than its standard products, and then getting up to £10,000 cashback that must be spent on eligible improvements to the property being mortgaged.

Is a green mortgage the best deal for me?

A green mortgage deal can look tempting, especially if it undercuts the mortgage rate on the lender’s other products, or perhaps offers a lower fee or some cashback.

However, against the wider market, it might not be the cheapest deal for you.

Mendes comments: “Day to day, we often find that while these products look competitive against a lender’s own range, they aren’t the very cheapest on the wider market. Many high-street lenders will beat competition on price, even without a green badge.”

Hollingworth echoes this: “It’s always important to consider the wider market rather than head straight for a green mortgage. Whilst it could offer a better option, there could still be lenders without a green badged deal that could be more competitive.”

While the Moneyfacts data shows that on average, green mortgages have lower interest rates than non-green deals, Rachel Springall, finance expert at the website, agrees that homeowners and first-time buyers shouldn’t immediately assume that a green mortgage is the best option.

“Green mortgages are a niche part of the mortgage sector and navigating them could be a bit tricky as some might not be the best package for a particular borrower. The incentives offered on green mortgages are mixed, so it would be wise for borrowers to go through the options with a broker,” she notes.

Looking ahead, government targets for net zero housing and lenders’ own pledges, such as NatWest and Nationwide aiming for half their mortgage books to be at EPC C or better by 2030, mean there will be more development in this space, according to Mendes.

“There is genuine momentum, although politics could shift the pace,” he says.

“Right now, green mortgages are more about signalling direction of travel than changing the game on affordability. If incentives strengthen through bigger rate discounts or government support, they could become a much more meaningful part of the market.”

Not all banks are equal, so it’s no wonder that Brits are compelled to switch accounts in search for something better.

That could be anything, whether it’s a bank switching offer with a lucrative cash bonus, access to a bank branch, higher interest rates or spending benefits.

The latest Current Account Switch Service (CASS) data shows that more than 12.4 million switches have taken place since the service launched in 2013, with over a million switches made in 2025.

We look at the most popular banks that customers switched their accounts to, what made them move, and whether you should switch banks.

Which were the most popular banks in 2025?

Nationwide again proved to be the most popular banking company that customers switched to between July and September. The building society amassed the highest net switching gains (41,450).

It was followed by Monzo in second place (9,934), and NatWest in third (8,731).

We’ve compiled a list of the top banks and building societies in terms of net gains in a table below.

Customer data from the Current Account Switch Service is published three months in arrears, which is why the data here is from July to September, and not October to December.

Source: Current Account Switch Service. Data shows the number of full account switches completed between 1 July and 30 September, 2025

Of the banks and building societies listed above, four have had cash bonuses for customers switching their accounts. This includes Nationwide, First Direct, NatWest and TSB.

Nationwide’s lucrative year-round offers, such as the £100 Fairer Share bonus, which it has offered for three consecutive years now, the Thank You bonus, and member-only savings products, may have proved attractive to a large number of customers.

Meanwhile, Monzo paid customers up to £50 to refer a friend, which may have driven its popularity.

Which were the least popular banks in 2025?

While a few banks gained new customers, a lot more lost out.

Santander saw the biggest losses (-19,989), as 42,609 switches were made from the high street bank, while it gained 22,620 new customer accounts.

In second place is Halifax with a net loss of -17,341, while Chase had a net loss of -7,623. Chase lost out on many customer accounts after axing its easy access saver rate.

In the table below, we list the banks that suffered from the highest net losses between July and September.

Source: Current Account Switch Service. Data shows the number of full account switches completed between 1 July and 30 September, 2025

Access to online or mobile banking was the most frequently cited reason for choosing a new account, mentioned by 44% of respondents. This was followed by better customer service (36%), attractive interest rates (34%), spending benefits (28%) and other benefits or features (28%).

It comes after more than £31 billion was left in savings accounts paying 1% interest or less, with savers being urged to switch to an inflation-beating savings account.

Should you switch your bank account?

Switching has now become easier than ever before. According to the Current Account Switching Service data, 93% of customers in the last three years were happy with the switching process.

If you use CASS, it takes seven days for the switch to complete. It makes sure that your direct debits, standing orders, and any new payments to your old account are transferred automatically, even after you’ve switched.

However, that doesn’t always mean that moving your money to another account will be the best option for you. It’s always best to consider the long-term value of a current account, like whether you’re getting better customer service, how much you’ll incur in fees or charges, and if you have access to physical branches.

Depending on the type of account you hold, your bank may already be offering better savings rates, travel perks, or spending benefits. So if you’re switching for the cash incentive alone, it might not be worth it in the long run.

We look at whether switching banks can affect your credit score in a separate piece.

Barclays will pay up to £7.5 million in compensation to customers after a three-day IT outage meant more than half of its payments failed.

The IT incident started at around 9:45am on Friday 31 January and lasted until the end of the weekend, with systems returning to normal on Sunday 2 February.

Customers of Barclays were unable to access online and mobile banking during the period, though were still able to use their debit cards as usual, including withdrawing money from an ATM. Some 56% of its payments failed during the period as a result of “severe degradation” to its UK mainframe.

In a letter to the Treasury Select Committee, which was investigating IT outages among UK banks, Barclays UK chief executive Vim Maru has said the bank is working to identify all customers affected as part of a "proactive remediation effort”.

Maru said they are prioritising efforts to identify and provide support to “customers with vulnerable characteristics” and said that “no customer will be out of pocket as a result of this incident.”

The incident was the 33rd such outage that Barclays has encountered over the last two years, which are thought to have affected an estimated total of 3.3 million customers.

This round of compensation will see the total amount that the bank has paid back to customers over IT faults in the last two years rise to £12.5 million.

The timing of the outage also caused some trouble for customers who tried to fill out their HMRC Self Assessment tax returns. The deadline to file was 31 January, the same day as the IT outage.

Maru told MPs Barclays acknowledges that the outage caused “loss or distress and inconvenience” to its customers “through no fault of their own,” justifying a need for compensation.

“Our initial estimate is that we expect to pay out between £5 million and £7.5million to our Barclays UK customers for inconvenience or distress caused by this incident,” the chief executive wrote.

“We continue to work through the impact to ensure no customer or client will be out of pocket as a result of the incident.”

What other bank outages have occurred?

Though Barclays is one of the most notable recent examples, owing to the extent of disruption that its IT problems caused, it is certainly not the only UK bank that has suffered outages in recent years.

The Treasury Select Committee found nine of the top banks and building societies in the UK had their services disrupted as a result of unplanned technology and systems outages in the last two years.

This amounts to at least 158 banking IT failure separate incidents between January 2023 and February 2025, leading to at least 803 hours of disruption to customers – the equivalent of 33 days.

A full list of UK banks and building societies that suffered outages in the last two years can be seen below:

Source: Treasury Select Committee

Chair of the Treasury Select Committee, Dame Meg Hillier MP said losing access to banking services on a payday can be "terrifying" for those “living paycheck to paycheck”.

She expressed concern about the number of outages, saying: “The fact there has been enough outages to fill a whole month within the last two years shows customers’ frustrations are completely valid.

“The reality is that this data shows even the most successful banks and building societies hit technical glitches. What’s critical is they react swiftly and ensure customers are kept informed throughout.”.

Will I get compensation for a bank outage?

If your banking services are disrupted as a result of an IT outage, you could be able to get compensation.

As mentioned above, Barclays plans to pay up to £7.5 million to customers affected by their most recent outage, and many other banks have also made some pay outs.

Nationwide, for example, has paid out £348,000 in the last two years, and NatWest has paid £348,000 to customers in the same time period.

Different banks will have different eligibility criteria that you have to fit, and you may not get any compensation.

How to get compensation after a banking app IT outage

If an outage meant that you were unable to use your bank account as you usually would, then it could be worth contacting customer support to see if you can get compensation.

Contact your bank

Your first action should be to raise a complaint with your bank. If you have been left worse off through no fault of your own, then your bank’s customer support team should be able to guide you through what options are available to you. If all goes well, they may be able to fix the problem there and then.

However, customer support from some banks is less than helpful. If you feel as though your bank did not adequately investigate or resolve your dispute, your next step will be to contact the Financial Ombudsman.

Contacting the Financial Ombudsman

The Financial Ombudsman is a free service set up by the government to sort out complaints between financial businesses and their customers.

The organisation can help customers who have problems with their bank accounts, payments, investments, mortgages, and much more. They are tasked to fairly listen to both sides of a dispute and should not be biased against either side.

Once you provide your details to the ombudsman, they will investigate your case and bring a ruling to you that you are able to accept or reject.

If you find the ruling to your satisfaction (i.e. they uphold your complaint), then the ombudsman can order your bank to compensate you.

Once you accept a decision from the ombudsman, it is unlikely that you will be able to pursue the matter in court.

If you do not find the ombudsman’s ruling satisfactory, then you can reject it. However, this means your involvement with them will come to an end and they will be unable to help you any further.

You will still have the option to take your case to court, but the ombudsman will not be involved in this.

Romance scams increased sharply during May and June, according to data from Barclays, with men losing £3,500 on average and women £8,900.

The UK bank found a 139% increase in the total value of romance scam reports when comparing May and June with the previous two months.

While men account for the majority of romance scam reports received, women typically lose more money, Barclays said.

Kirsty Adams, a fraud and scams expert at the lender, said: "It may be surprising to see that men more often fall victim to romance scams, as stereotypes have often incorrectly painted women as more susceptible.

"This is backed by our additional research, which shows that men are generally more willing than women to transfer money to people they have recently started dating, even if they are yet to meet in person."

What does a romance scam look like? 

Romance scammers usually create fake profiles online on social media and dating apps, such as Instagram, Facebook and Tinder. 

They trick people into believing that they are in a relationship through false romantic gestures or words. After this, they normally begin asking for money claiming medical or family issues. 

There is no limit on how long such scams can last, as it can be anywhere from a few weeks to months. 

We look at how to differentiate between a genuine connection and a fraud, and a few things to be wary of. 

How to avoid romance scams  

What makes romance scams so dangerous is how fraudsters can control the victims’ emotions and make their feelings appear legitimate.

But sometimes, following your gut instinct can be the right thing to do in order to protect yourself. 

Here are a few ways to save yourself some emotional and financial damage:

Be cautious of strangers on social media 

Avoid accepting friend requests from people you don’t recognise. In the odd case that you do, make sure to thoroughly check their profiles before you begin a conversation. 

Carry out a reverse image check

Sometimes, scammers tend to use attractive or stolen photos to create a fake identity. By doing a reverse image search on Google, you can verify if it’s an authentic person or a fake. 

Ask questions

Sometimes, if the person seems as if they are too good to be true, it might just be right. A lot of times, scammers tend to stick to asking personal questions, instead of answering them. Try to get the most out of the other person and cross-check that information online, if possible. For example, a school they went to or a friend you have in common. 

Never send money

If you’ve only met someone online and they ask you for money, they’re most likely to be a scammer. Don’t share any personal information such as your bank details or passwords that could be exploited. 

Notice the tiny details

See if the person avoids showing their face on video calls or suggests meeting in person. It might be because they are catfishing or using someone else’s photos to trick you. 

Report suspicious activity

If you suspect you are being targeted by a scammer, report the account or incident online. It’s always better to be safe than sorry.  

Liz Ziegler, fraud prevention director at Lloyds Bank, said, “Social media and online dating apps are rife with fake profiles, and it can be hard to tell who is genuine. 

“Remember that no good relationship starts off by sending money to someone you haven't met and this should be a big red flag. 

"As soon as someone you’re talking to starts asking for money, step back from the situation and never hand anything over.”

What to do if you fall for a scam 

If you have sent money to someone you now suspect to be a fraudster, the first thing to do is to speak to your bank, building society or credit card provider. You should do this as quickly as possible; they may be able to stop the payment or refund you the money.

It’s also a good idea to report scams ‒ whether you fall for them or not ‒ to Action Fraud. This is the national fraud and cyber crime reporting centre, which is run by the police.

Nationwide, HSBC, Barclays and Virgin Money customers have been hit by payment problems, leaving many unable to send and receive money.

This is not the first time a major UK bank has faced technical issues - last month, Natwest's app saw an outage which affected 10 million customers. 

The issues have been compounded as Friday is the last working day of the month and when many are paid by their employer. Many also have direct debits leaving their accounts to pay bills.

HSBC UK said on its website: "We're really sorry that some customers are having issues accessing personal online and mobile banking. Our IT teams are working hard to get these services back to normal.”

Virgin Money said access to its app has been restored after issues in the early hours of Friday but that there is a backlog of payments to process.

Meanwhile, Nationwide told the BBC it was aware of "third-party payments issues impacting some providers, including Nationwide" which had "delayed a small number of payments".

Nationwide added that it expected these to be "processed and paid later today.”

Virgin Money said on X, formerly Twitter, that "like other banks" it is "working hard to process the backlog of payments delayed as quickly as possible".

Banking glitches - how long will they last? 

Customers have taken to social media to vent about the problems. One customer said on X: “Very embarrassing 20 minutes this morning when my card was declined for a trolley load of shopping because the money I transferred earlier hadn’t arrived into my account. No cash machines either.”

It is understood that Nationwide, HSBC, Barclays and Virgin Money were affected by issues with the Faster Payments service, which allows UK sterling payments to be made electronically between banks on the same day. 

It is understood the issue has now been fixed, although a backlog of payments is still causing issues.

Pay UK, which oversees the system, said: "We are aware that a small number of Faster Payments were delayed or not processed earlier today.

"Working with our infrastructure provider, this technical issue has been fixed."

This is not the first time the banks have experienced problems. In March, Nationwide customers reported a range of issues, including not being able to transfer money, while in November HSBC was forced to apologise after thousands of its UK customers were unable to access mobile and online banking for more than 24 hours.

What can you do if your bank has an IT glitch? 

If you have made a loss because of the banking glitch, you should contact your bank and ask them to put it right and to cover any losses you may have made. 

For example, you may have got charged for a late payment, or paid to travel somewhere but were unable to pay for your goods or service.

According the the Financial Ombudsman, the bank must respond within 15 days and if you are unhappy with the response, you can take the matter to the ombudsman for further investigation.

Choosing the best bank for your money isn’t always straightforward. From switching incentives and customer service to branch access, spending benefits and the interest rates on offer, there’s a lot to weigh up before deciding where your cash goes.

We look at the most and least popular banks in a separate guide, where Nationwide stood out thanks to its lucrative cash bonus, Fairer Share payments and top savings rates.

New analysis from Which? sheds light on the best and worst UK banks and bank accounts.

We look at the winners and losers, so you can see where your provider sits.

The best UK banks – how they rank

Which? asked thousands of customers how they would rate their banking providers. The data is based on several parameters, including ease of application and service in a bank branch, over the phone, online and app-based, and customer helplines.

In top place is Starling Bank, which is one of Which?’s recommended providers for the seventh consecutive year. The bank ranks highly in customer service and current account users are happy with its online banking service. Starling also launched a new AI banking tool that helps customers learn more about their spending habits.

Monzo is another one of Which?’s recommended providers. The challenger bank impresses customers with fee-free spending abroad, cashback on eligible spending and competitive savings rates, but falls short in customer helpline services.

First Direct is also in the top rankings – it’s one of only two banks which received full five stars for customer service and telephone banking. It also offers fee-free transactions abroad, and has an attractive bank switching deal.

Among more traditional high street staples, Nationwide ranks highly thanks to its extensive branch network. The building society has pledged to protect its branches from closures until at least 2030.

We look at the full results in the table below.

Source: Which? data based on a survey from September 2025. N/A means not enough responses for a star rating.

The best UK bank accounts – how they rank

Which? has analysed different bank accounts offered by bank and building societies. The parameters it has tested include interest paid, fee-free spending, interest-free overdraft and monthly fee.

Source: Which?. N/A means not enough responses for a product rating.

How to choose the best bank account for you

Despite the above findings, banking expert at Which?, Chiara Cavaglieri, says: “For too long, the biggest banks haven’t had to work very hard to keep customers, but challengers such as Monzo and Starling have quickly made their mark. They’ve forced bigger providers to innovate, and the result is a market where different providers shine in different areas. Even if you can’t bear to ditch your longstanding bank, think about what's important to you.”

With so many accounts to choose from, there are several factors to consider before you make a decision.

While a bank switching deal means customers have extra cash to cover the Christmas festivities, Rachel Springall, finance expert at Moneyfactscompare.co.uk, warns against making hasty decisions.

“An upfront free cash injection is a great sweetener, but consumers should only ever switch accounts if the new deal offers them better value,” she said, pointing out that while free cash offers don’t last forever, customers shouldn’t feel pressured to switch.

If you’re after spending perks and travel benefits, it might be worth checking out the best packaged bank accounts.

Springall said: “If customers opt into a packaged account, one that bundles in benefits, then they could find it to be more cost-effective than taking out separate insurance policies elsewhere, like travel insurance or mobile phone insurance.”

We look at whether travel insurance is worth it in a separate guide.

“There is a plethora of different benefits to choose from, such as high interest current accounts, those with a competitive overdraft tariff, as well as packaged accounts with integrated insurance plans or even accounts that reward savers or spenders,” Springall added.

“Those consumers who plan to make frequent trips abroad can also find accounts that don’t charge them for using their debit card in an ATM or in-store, so they can avoid paying out on transaction fees compared to a more traditional bank account.”

FSCS scheme: Are your savings safe?

The Financial Service Compensation Scheme (FSCS) protects your savings and investments if a financial services firm goes bust.

This includes current accounts, savings accounts, Shariah-compliant accounts, ISAs, and more.

On 1 December 2025, the FSCS limit rose from £85,000 to £120,000. It means that you will be covered for up to £120,000 if your money is with an FSCS-protected institution.

You can check which institutions are covered on the FSCS website.

Barclays has brought in a limit that affects the amounts its in-branch customers can deposit in cash.

Aimed at cracking down on financial crime, the high street giant has imposed a new £20,000 limit for all personal accounts, including children’s savings accounts. This cap will refresh annually.

The move follows a warning from the bank earlier this year that is has seen a rise in investment scams. The news also comes as Barclays continues to reduce the size of its branch estate, with 57 sites set to close by 2025. It also recently acquired Tesco Bank in what is expected to be a £600m deal.

What are Barclays’ new cash deposit rules?

Barclays’ new cash deposit limit means no one is able to pay more than £20,000 a year into their personal accounts using a bank branch. This rule includes children’s savings accounts and joint accounts, but does not apply to business accounts.

The cap came into force on 1 July 2024, and will refresh every year in January. It means the £20,000 cap initially applies for a six-month period (until January 2025).

The new rules apply to deposits handed in over the counter, or through a self-service device, with each cash deposit counting towards the annual total. If you have a joint account with one other person, it means you are now only able to physically put in a maximum of £10,000 each. Online transactions and cheque deposits are unaffected by the change.

It comes on top of a £10,000 cash deposit limit at Post Office branches offering Barclays' banking services. Any deposits made via these branches also count towards the Barclays limit.

Why has Barclays introduced a cash deposit limit?

Explaining the rationale for the changes when the cap was announced in April, a Barclays spokesperson said they would help the bank to ensure its in-branch services are not being used for nefarious activities. For example, the new rules theoretically make it harder for money laundering to take place.

The spokesperson said: “We take financial crime and our responsibility to prevent money laundering seriously. We have contacted customers to let them know that from July we are making some changes to the amount of cash customers can deposit into their Barclays accounts. We have set the limit at an amount that will allow us to better identify suspicious activity, while still ensuring our customers have access to cash.”

It comes after the Financial Conduct Authority (FCA) wrote to more than 1,000 financial services firms in March 2024 to remind them of their anti-money laundering responsibilities. The regulator said these companies, which included lenders, safe custody providers, brokers and financial leasing companies, were “still not getting the basics right” when it came to looking out for financial crimes.

Regulators and big-name banks have become much more alert to financial crimes, like money laundering, in recent years after several high-profile cases involving household names. In 2018, Danske Bank was caught out for funnelling ill-gotten gains through a branch in Estonia.

And in 2022, Credit Suisse was found to have laundered money for a Bulgarian drugs ring. This, and several other scandals, contributed to the Swiss giant’s collapse in 2023 following a wobble in market confidence in the global banking system.

Do other banks have cash deposit limits?

With its new cash deposit limit, Barclays has become one of the few major banks to have an in-branch cap. Here are the personal deposit rules at some of the other high street groups and brands:

• HSBC: no in-branch limit, although customers going via a Post Office can only deposit up to £3,000 a day, and £20,000 a year.
• Lloyds: no in-branch limit, however people can only deposit up to £5,000 a day at mobile branches. In Post Offices, there is a monthly £2,955 limit, and an annual maximum of £20,000, if you have your debit card with you. Without it, you can only deposit £1,000 in one go.
• Nationwide: no over-the-counter limit, but you cannot deposit more than £2,500 into an in-branch machine per day.
• NatWest: there is no over-the-counter limit. You cannot deposit more than £3,000 a day, or £24,000 over a rolling 12-month period, at a Post Office or via any deposit machine.
• Santander: a maximum of £20,000 can be deposited per day. At a Post Office, the limit is £10,000. There is an annual rolling limit of £240,000.
• TSB: no in-branch limit, but there are daily deposit limits of £1,500 and £10,000 per year in Post Office branches.

An increasing number of people are falling victim to investment scams, which according to Barclays has gone up by 23% year on year. 

But this isn’t the first time investors have been caught up in a battle against scammers. Just recently, the Pensions Management Institute found that investment scammers stole over £2.6billion from nearly 100,000 customers between 2020 and 2023, with roughly £13million lost each week. 

Other scam warnings have also been rife in the last couple of months, with the rise of banking copycat websites, holiday scams, Amazon cold calls, recruitment scams on WhatsApp, crypto scams and fake dating profiles.

We look at how investment scammers are targeting customers and how you can protect yourself from such frauds. 

Investment scams on the rise

New data from Barclays reveals a troubling surge in investment scams. The data shows that in 2023, one-third of all money lost to scammers came from investment scams, which have increased in volume by almost 29%. 

There has also been a sharp spike in investment scam-related cold calls, which have grown by a staggering 193% in the last five years, according to data from the Financial Conduct Authority’s (FCA) consumer helpline.

On average, victims lost about £14,313 per scam, with men being hit the hardest at roughly £16,206 per claim. Millennials, especially those between the ages of 21 and 40 are also at risk, often falling for promises of high returns on investments. 

Alarmingly, nearly half of the investment scam claims are made by young people, and one in ten people in the UK knows someone who has fallen victim to such a scam. 

What’s adding fuel to the fire is scammers using social media to prey on those who believe they’re investing in their future. About 61% of these scams are happening on social media sites through fake and unverified financial adverts, which are ripping people off. 

One in five young people are being approached by scammers on social media, which is why Barclays is highlighting the importance of being vigilant. 

Stephanie Mac Sweeney, head of fraud strategy at Barclays said, “It’s worrying to see such a rise in investment scams – with victims often heartlessly scammed out of large sums of money that they have been saving for their future. The banking industry works hard to educate, identify and intercept scams, but the only way to drive real change is to target these scams at their source.”

How to spot an investment scam

The FCA's consumer helpline data shows that investors have saved £2million by identifying when investment opportunities were fake. 

While it’s not easy to spot investment scams, especially when you’re shopping around for the real deal, here are a few ways you can catch any fishy behaviour and protect yourself. Remember, there’s no such thing as being too careful.

Too good to be true

The most common trick in the scammers’ playbook is to get their potential victims to start small and invest tiny amounts of money but with high rewards. This convinces the person being targeted that it’s legitimate, and over time, small amounts become larger and then all of a sudden, a huge sum is lost to these frauds. So if an offer seems too good to be true, it most likely is. 

Don't believe everything you see online 

Social media thrives on a sense of impulse and urgency, be it TikTok videos or Instagram stories. Scammers use this to their advantage to trick people into making investments that can often turn against them. It’s important to think twice and speak to your trusted friends and family members before you commit to any such investments. 

Do your research 

If you want to check whether an investment opportunity is genuine, look at the details. Is the grammar correct? Does it have any weird spelling errors? Can you find a photo or profile of the person you’re speaking to online and do they actually exist? Go a step further and check if the person or organisation you’re speaking to is FCA authorised through the Financial Services Register or the FCA’s ScamSmart Investment Checker. This way, you’ll be able to weigh the risks of any potential investment opportunity you’re considering. 

While these are good ways for customers to protect themselves from investment scams, not all of the burden should fall on them. Sweeney says, “With the majority of investment scams now taking place on their platforms, social media firms must take responsibility, act on their promises and deliver a robust verification system to protect innocent people from falling prey to fraudulent investment adverts.”

How to report an investment scam

If you become a victim of a scam or suspect you’re being targeted, you can report it to Action Fraud or call them on 0300 123 2040 anytime between Monday to Friday 8am and 8pm.

Tell your bank immediately using the Stop Scams UK website or by dialling 159. You can call them directly, or in case of risk or threat, be sure to dial 999.  

This deal is no longer available. Please see our best offers for switching banks guide for up-to-date deals. 

Bank switching services have been coming in waves this year, with some banks paying up to £205 for moving your everyday banking to them.

If you are looking to switch your current account, then this is a great way to bag some ‘free’ cash - though you will often have to close your existing current account and use the bank switching service to get the bonus. 

This week, high street giant Barclays has jumped in on the act, hoping to draw new customers in with a £175 switch bonus when they move their current account to Barclays. The account also gives you access to one of the best savings rates on easy access savings.

The incentive follows Barclays results last week, which revealed UK deposits in current accounts at the bank dropped 6%. But can the bank bring in new customers with its new switching bonus alongside a generous  5.12% savings rate for easy access? 

How to get the £175 Barclays bonus 

To get the bonus, you will have to close your existing current account and switch to Barclays using the Current Account Switch Service. The service is free and promises to shift your direct debits and other payments for you within 7 days. 

To qualify for the cash bonus, you must:

•  Open an account via the Barclays app (open a new account or join Premier Banking) 
•  Bring across at least two direct debits 
•  Join the Blue Rewards Scheme - you must deposit at least £800 a month to qualify for this 
• Sign up to online/mobile banking at £5 a month - but you get this back via cashback if you have a minimum of two direct debits
•  The account you open must be an individual one, not a joint one 
•  You must start the switch by 30 November and complete it within 30 days 
• You must not have any other Barclays accounts, or have ever held one. If you are switching to the Premier Account, you need to pay in an annual income of at least £75,000 or have at least £100,000 in savings or investments with Barclays. 

The switch bonus will be paid within 28 days as long as you meet the criteria.

How can I earn 5.12% on my cash savings? 

The 5.12% AER savings rate is for an easy access account and you only get it via the Blue Rewards Scheme, available to current account holders.

But, the rate is only available on balances of up to £5,000 - anything more and you'll simply earn 1.15%.

How does the rate compare to other savings? 

The rate is not far behind the next best rate for easy access, which is via Natwest owned Ulster Bank,  paying 5.2% interest.

You can also earn up to 15% cashback with Barclays Blue Rewards with some retailers when you link your debit card.

It has been a challenging few years for the UK banking sector after valuations took a hit in the aftermath of the Brexit referendum, remaining low to this day.

The trend is reflected among UK equities in general, but banking stocks may present an investment opportunity for some investors if, as some believe, they are undervalued.

On the one hand, the surge in interest rates since December 2021 has generally been good news for the sector’s earnings. However, lenders have also had to compete for deposits by offering savers higher rates of interest, and the cost-of-living crisis has threatened defaults on loans.

What’s more, last spring, there was turmoil in the banking sector overseas, and this spooked investor confidence. In Europe, the banking giant Credit Suisse collapsed and had to be bought out by UBS. Meanwhile in the US, Silicon Valley Bank, Signature Bank and First Republic Bank all went under. 

Despite concerns around contagion, this did not develop into a 2008-style banking crisis and UK banks held up. However, the events did not do anything to help valuations. 

Speaking at Loughborough University on 16 February, Bank of England Governor Andrew Bailey noted this very point. 

Reflecting on recent events, he described Covid as the “first big test” for the banking reforms carried out in the wake of the global financial crisis. It is a test that the sector has navigated “effectively”, he said. So, with this in mind, the fact that valuations are still “in the doldrums” is “a puzzle expressed often by banks”, he added.

Against this backdrop, you might be wondering whether now is a good time to invest. Do puzzlingly low valuations present a good investment opportunity, or is the sector set to remain unloved? 

We look at the pros and cons of investing in UK banking stocks, while also highlighting some of the key themes from this year’s results season.

Are UK banks undervalued? 

Reflecting on current market valuations, AJ Bell investment director Russ Mould notes that “all of the FTSE 100 banks trade below book value”. In other words, they are trading at a discount, because the total value of their assets is higher than the market price of the shares.

This suggests that “the market does not believe the asset valuations, or it does not believe they can make a decent, risk-adjusted return on those assets, or a combination of the two”, he explains.

This in itself is not a reason to buy – investors would need to be confident that the market will catch up, realising the inefficiency at the heart of its pricing. 

And while Owen Freshwater, investment manager at Evelyn Partners, acknowledges that “UK banks remain one of the cheapest sectors in the UK stock market”, he thinks that “it is difficult to find a near-term catalyst for the sector”. He highlights concerns about rising loan losses and squeezed margins as two factors that are “weighing down the sector”.

Matt Britzman, equity analyst at Hargreaves Lansdown, is more optimistic though. He believes that “there are several tailwinds yet to play out that could give room for upside beyond current consensus”. 

“With the return of real wage growth, plus a stabilising housing market, consumers should remain resilient”, in his view. “At the same time, banks are seeing easing conditions in the mortgage market and what looks to be a peak in terms of consumers shifting to higher cost savings accounts”, he adds.

With this in mind, he believes that investors should think of banks as being “like a bond portfolio that’s rolling on to higher yields over the next few years”, adding that “Lloyds and NatWest look best placed to benefit from these improving trends”.

Which UK banks should you consider?

The risk associated with banks depends on the lender, so here we break down the key things you need to know about the five major lenders in the UK. HSBC, Lloyds, Barclays, NatWest and Standard Chartered – the big UK-listed banks – share a lot of key features but there are some differences.

HSBC and Standard Chartered are increasingly global businesses with strong focuses on Asia. They are more insulated to some of the domestic problems in the UK, but also exposed to additional risks overseas – most recently challenges in the Chinese economy.

NatWest, Barclays and HSBC all have an investment arm which leaves their shares exposed to higher risk, but potentially higher reward too. Barclays’ investment arm has been in the news recently, for example, with many investors calling for the bank to ditch this part of its business as it has dragged on profits.

We take a look at some of the key themes impacting the five major banks this results season.

Barclays: ambitious plans announced

Barclays announced its 2023 results to investors on 20 February. As part of this, it unveiled a three-year plan to improve its operational and financial performance. 

As well as looking to boost returns to more than 12% by 2026, the bank is planning to cut costs by £2bn. Furthermore, it is looking to return £10bn of capital to shareholders between 2024 and 2026 through dividend payments and share buybacks. 

This news came just over a week after the bank announced its plans to acquire Tesco Bank, further building on its proposition for retail customers. 

The bank also has an investment arm, but some investors are calling for it to focus solely on its retail proposition, with the investment business having dampened profits in recent years.

Commenting on the bank’s recent results, Mould highlights that the bank’s “net asset value per share (NAV) is growing”, adding that this “might be a start in persuading investors that its shares are too cheap, especially given the bumper cash returns”. 

That said, he warns that the bank will need to “keep its nose clean and avoid any fresh litigation and conduct costs”, as well as “keep[ing] loan losses to manageable levels”.

Natwest: retail share sale could offer a discount 

Natwest released its 2023 results on 16 February, revealing strong performance for the year. 

The bank’s pre-tax profits were up 20% compared to 2022, exceeding analyst expectations. This is the highest they have been since 2007. The bank proposed a healthy dividend of 11.5 pence per share, as well as announcing plans to launch a £300 million share buyback scheme in 2024.

Conscious of falling interest rate expectations, the bank has been cautious in its outlook going forward. 

“Unlike Barclays, NatWest have reset expectations and lowered their expectations for the coming years, in part due to fears that falling interest rates could lead to lower returns”, says Freshwater. “Despite this, the dividend remains well covered and they are committing to further buybacks”, he adds.

It also looks like a Natwest retail share offer could take place later this year, with the government looking to sell its 35% stake in the bank. Investors are expecting the government to offer the shares at a discount to their full price to encourage interest, which could create an attractive entry point.

HSBC: challenges in China’s real estate sector 

HSBC also saw its pre-tax profits rise to $30.3 billion in 2023, increasing by 77% compared to the previous year. Despite this, they came in below analyst predictions, marred by challenges in the Chinese economy. The bank has a strong presence in the region. 

Chief executive Noel Quinn highlighted several steps the bank had taken to reward shareholders over the course of the year, including the “highest full-year dividend since 2008, three share buy-backs last year totalling $7bn, and a further share buy-back of up to $2bn”. 

However, investors appear to have focused more on the bank’s challenges in China, with the share price dropping by its biggest amount since 2020 in the wake of the results on 21 February. 

“While the potential for growth is greater [in Asia], the ongoing issues with the Chinese economy, notably in the real estate sector, have led to both [HSBC and Standard Chartered] tak[ing] significant impairments on their loans”, says Freshwater. Until these problems are resolved, he thinks it is “difficult to see a catalyst” for their valuations improving.

Standard Chartered: also exposed to China 

Standard Chartered also reported an increase in profits when it released its results on 23 February. Pre-tax profit jumped by 27% to $5.7bn. 

“We have increased full year dividends, up 50%, and have announced a new $1bn share buyback, bringing our total shareholder distributions to $5.5bn since January 2022”, CEO Bill Winters also outlined. 

Like HSBC, though, the bank also reported losses related to its Chinese real estate portfolio.

Lloyds: embroiled in car finance scandal

Lloyds released its 2023 results on 22 February, reporting pre-tax profits of £7.5 billion. This was a 57% increase compared to the year before, and slightly exceeded analyst expectations. 

The company also announced a dividend of 1.84 pence per share, and a share buyback programme of up to £2 billion. 

Despite this, the news was overshadowed by the bank putting aside £450 million for potential customer redress. This is in light of the latest customer protection scandal. Lenders are currently preparing for a regulatory review into the mis-selling of car finance.  

“[T]he FCA’s motor finance review [is] likely to lead to compensation akin to the PPI scandal”, says Freshwater.

Should you invest? 

With all of this in mind, does the sector present an attractive investment opportunity? In short, it depends on what you are looking for. 

A common theme across all of the banks this results season has been returning capital to shareholders, both in the form of generous dividends and share buyback schemes. So, if you are looking for income generators in your portfolio, the sector could be worth considering – particularly given that you can currently buy banking stocks up cheap.

Responding to the Barclays release earlier this month, Mould wryly commented, “Maybe banks are going to come back into fashion after all, if only because they start to function as cash machines rather than operate them”.

The dividend yield across the five major banks is as follows:

Source: Morningstar Direct as of 23 February 2024.

One thing to bear in mind is that interest rates are forecast to fall later this year, with inflation now coming under control. This could mean that the sector’s earnings are not as strong going forward as they were in 2023. 

Furthermore, if you are looking for growth, you might be better off investing elsewhere. There are no guarantees that investors will realise the valuation discount on banks any time soon, so prices could stay deflated.

The regional and regulatory challenges faced by some of the individual names are also something to keep an eye on, if you are considering investing.  

If you want exposure to the sector without putting all of your eggs in one basket, holding a small amount across several banks could be a better strategy than taking a larger stake in just one. 

The Financial Conduct Authority (FCA)  has told some of the country’s biggest banks to boost progress on improving savings rates for customers amid accusations of profiteering. 

Currently, the top savings accounts are offering rates of up to 7% for existing customers, but the industry average is well below this.  

Following a meeting with bank bosses, including those from HSBC, Barclays, Lloyds and NatWest, the regulator said the lenders recognised they “needed to do more to help their consumers access the best rates.” 

But Sheldon Mills, FCA executive director for competition, said "It's not for me to set rates for banks." 

Banks under pressure due to low savings rates 

Despite the soaring cost of loans and mortgages, banks have been attacked for not passing higher interest rates onto savers. 

According to Moneyfacts, the average two-year fixed mortgage rate is 6.52%, with the savings rate on offer from some high street banks well below that figure. Despite increases in recent days, the average one-year fixed savings rate is 4.83%.

The FCA said: “We have started to see some positive action by banks and building societies to improve their rates, and to ensure their customers are benefiting from better value products. We now want to see that progress accelerate.”

The meeting comes ahead of the Consumer Duty roll out - a new string of regulations the FCA said will “put consumer interests at their heart… to ensure their customers are benefiting from better value products.”

High street banks are also facing pressure from MPs. Earlier this week, the cross-party Treasury Committee wrote to the banks asking whether they believe all their savings rates “provide fair value” to customers. 

Dame Angela Eagle, a member of the Treasury Committee, said: “This blatant profiteering has been shocking, and it’s clear to me this behaviour is miles away from the incoming requirement for firms to treat their customers fairly and with respect.”

"With interest rates on the rise and our constituents feeling squeezed by rising prices, it is only right that the UK's biggest banks step up their measly easy-access savings rates," Harriett Baldwin, chair of the committee, said in a statement. 

Banks boost rates in response

The good news is, banks seem to be getting the message. Ahead of the meeting with the FCA, HSBC unveiled a 0.65% increase on Fixed Rate Saver accounts  - its one-year Fixed Rate Saver increased to 5.05% and two-year Fixed Rate Saver is now 5.1%.

Lloyds is also boosting its rates across its Fixed Rate Cash ISAs from 12 July. Its one-year fix will increase by half a percentage point to 5.45%, with its two-year fix rising to 5.5%.

But any reprieve in cash savings rates is “being drowned out by the stubborn persistence of high inflation,” said Myron Jobson, senior personal finance analyst at interactive investor. 

“Those who can afford to put money away for five years or more should consider investing for the potential of long-term inflation-beating returns that far outstrip savings rates,” he said.

Compounding the problem is the issue of inertia, with many savers not shopping around for better rates. £250 billion is sitting in bank and building society accounts paying no interest, while £945 billion is in instant access accounts.

At the same time, banks are recording booming profits. 

NatWest reported a 50% bump in profits during the first quarter of 2023 to £1.9bn, while Lloyds filed a pre-tax profit of £2.26 billion, up 46.4% year on year. Barclays reported pre-tax profits of £2.6 billion, up 27%. HSBC meanwhile tripled its quarterly profits to $12.9bn.

In a statement issued alongside its quarterly report, HSBC said the surging profits were a result of “higher net interest income in all of our global businesses due to interest rate rises.”

Bank bosses have been summoned to a meeting with the financial watchdog to discuss concerns surrounding interest rates for savers lagging behind the cost of mortgages.

The Financial Conduct Authority (FCA) expects chief executives from HSBC, NatWest, Lloyds and Barclays, as well as from smaller lenders, to attend on Thursday amid allegations of “blatant profiteering”.

Higher interest rates have resulted in banks increasing mortgage rates sharply, yet savings rates are not rising at the same pace. 

The average easy access savings rate today (5 July) is 2.48% while the average 1-year fixed savings rate is 4.80%, according to Moneyfacts. 

Meanwhile, the average 2-year fixed residential mortgage rate is 6.51% and the average 5-year fixed residential mortgage rate is 6.02%.

The Bank of England raised its base rate to 5% last month and further increases are now expected.

Chancellor Jeremy Hunt has said it is an “issue that needs solving” amid households struggling with the cost of living crisis.

But sources were playing down the likelihood of a charter being drawn up in the vein of the one agreed between Chancellor Jeremy Hunt and the big mortgage lenders.

Meanwhile, Rishi Sunak said the Financial Conduct Authority (FCA) wanted to deliver “better deals for savers”.

The Prime Minister told the Commons Liaison Committee: “What the Chancellor said is the issue needs to be resolved.

“I know that he has met recently with the FCA and they have agreed to deliver better deals for savers by driving competition and increasing reporting, which I think they are doing in the next few weeks, in particular, to make sure that savers are benefiting from higher interest rates.

MPs on the Treasury Committee were stepping up their campaign to increase saving rates for lenders, which are failing to keep up with soaring mortgages.

They wrote to the four biggest lenders demanding answers to their concerns that saving rates are “too low” in the light of the base interest rate reaching 5%.

Dame Andrea Leadsom, the former Cabinet minister who sits on the committee, said that “it’s quite clear they have failed to pass on the rise in interest rates to savers”.

Colleague Dame Angela Eagle added: “This blatant profiteering has been shocking, and it’s clear to me this behaviour is miles away from the incoming requirement for firms to treat their customers fairly and with respect.”

From the end of July, a new consumer duty will be introduced to force financial firms to put consumers at the heart of what they do.

THE BEST SAVING RATES

Even though returns on cash savings accounts are still negative in real terms as inflation at 8.7% eats away at even the most competitive savings rates, if you have cash lingering in an account that pays a poor return, then here’s where you can shift your money to to get a boost.

The best easy-access savings account pays 4.21% from Chip Instant Access Saver. It is only available to existing customers and managed in-app.

The best savings account for existing customers is First Direct’s Regular Saver that pays 7% for 12 months. Monthly savings are limited to a maximum of £300.

Meanwhile, the best one-year fixed savings account is with My Community Bank and pays 6.03%. It has a minimum deposit of £1,000.

For more on savings rates, see our Best savings accounts July 2023. 

If you’re unhappy with your current account, switching banks by taking advantage of the best bank switching offers can be a good way to move your money and get ‘free’ cash in the process.

More than a million bank account switches took place last year, according to the Current Account Switch Service (CASS). Nationwide recorded the largest net gain, attracting 41,450 customers. Digital bank Monzo ranked second with 9,934 switches, followed by NatWest with 8,731. We delve into the most and least popular banks among customers in a separate piece.

Kalpana Fitzpatrick, editor of MoneyWeek.com, says: “Bank switching deals are a great incentive for anyone looking to move banks. But, before you switch, make sure the bank you are moving to offers what you need – don’t switch just because there is a cash bonus on offer.”

There are currently seven bank switching offers on the market, with incentives of up to £300 in cash, as much as £750 in cashback, or a signature experience worth £600.

We round up the deals available now and explain how to qualify for the bonus.

The best bank switching offers

The Co-operative Bank – get up to £300

The Co-operative Bank’s switch offer is currently the market-leading bank switching deal, but you’ll have to jump through several hoops to be eligible for the full amount.

You can get £125 in free cash, another £75 over three months, and existing members can bag an additional £100 loyalty bonus.

Here’s how to get £125:

• Deposit a minimum of £1,500 into the new account.
• Have two active Direct Debits.
• Complete five debit card transactions.
• Register for the bank’s online and/or mobile banking service.

Once you complete these steps, you will receive £125 within seven days of meeting all of the criteria. You’ll need to do this within 30 days of switching your account.

How to get £75:

To get the £25 per month in the first three months, customers must keep using their account by:

• Depositing £1,500 or more.
• Maintain two active Direct Debits, and
• Making five or more debit card transactions

Your three months will begin on the day after you receive the £125 switch incentive. Your account will then be credited with £25 for each month you do this, for up to three months.

You won’t qualify if you have benefited from a switch bonus at The Co-operative Bank since November 2022.

£100 bonus for existing customers:

You’ll receive another £100 in November if you are an existing customer and:

• Had an account open with The Co-operative Bank or Coventry Building Society as of 21 June 2026
• Met the criteria for the above £125 payment
• Still hold an account in November

NatWest – get up to £250

NatWest is offering £250 to new and existing customers who didn’t have a NatWest current or savings account as of 10 March 2026. To qualify for the switching bonus, you must:

• Open a NatWest Premier account and complete a switch using CASS
• Pay in £5,000 within 60 days (either as a single deposit or in multiple instalments)
• Log in to the NatWest mobile app

The £250 will be credited automatically within 30 days of meeting the requirements.

Customers can also earn up to £9 a month through NatWest’s rewards programme. This includes setting up two Direct Debits, 1% cashback at select retailers, and £1 per month for logging in to the app. Once the balance reaches £5, you can redeem the rewards for cash or vouchers.

Get up to £750 in savings interest

Alongside the switching offer, NatWest is offering a savings bonus worth up to £750 to customers who deposit £100,000 into its Flexible Saver account. This means high earners could get up to £1,000 from NatWest.

Here’s how to qualify:

• Deposit £100,000 into the account
• Maintain the balance for at least 30 consecutive days.

You don’t need to wait to receive the £250 switching bonus before opening the Flexible Saver.

In order to be eligible for a NatWest Premier account, you must meet at least one of these criteria:

• Have an income of at least £100,000 or £120,000 in joint income
• At least £100,000 held in savings or investments with NatWest
• A NatWest mortgage of at least £500,000

However, it’s worth noting that NatWest Group is closing 18 more bank branches by 2027, so if your local branch is shutting down and you prefer in-person banking, it may not be suitable for you to switch.

HSBC – get £220

HSBC’s switching offer is offering new customers £220 for switching to an HSBC UK bank account. Here’s how to qualify:

• Complete a full switch with CASS
• Transfer two direct debits
• Deposit at least £2,000
• Spend £500 on your HSBC debit card

Once you meet the requirements, you will receive the bonus within 60 days.

This offer isn’t available for existing HSBC or First Direct customers, or those who have held an account with either of the banks since January 2023. You will need to apply for the switch on the HSBC app.

Barclays – get £200

Barclays is offering £200 to new customers who open a current account with the bank. To qualify, you need to follow these steps:

• Open a Barclays Bank Account through the Barclays app.
• Complete a full switch, including at least two direct debits.
• Deposit a minimum of £2,000 within 30 days of opening the account.

Once you’ve followed these steps, you’ll receive the £200 in your new account within 28 working days. The switching offer ends on 27 August 2026.

Get a premier experience worth up to £600

Barclays is offering an experience-led reward worth up to £600 for customers who switch to its Premier account. You will need to follow these steps to qualify:

• Open a Premier account using the Barclays app
• Complete a full switch, including moving two direct debits
• Pay in at least £4,000 within 30 days

After you open the account, you can choose from four types of high-end experiences:

• Dining: Restaurant experiences at select UK venues, including the Gordon Ramsay Restaurants. Specially curated menus for Barclays customers, wine pairings, welcome drinks and £50 Uber credit.
• Stay: Luxury UK hotel stays with select partners such as De Vere, Dakota Hotels and Harbour Hotels, including champagne on arrival, a three-course meal, spa access and complimentary breakfast.
• Live events: Tickets to stadium concerts at Wembley, sporting fixtures like England cricket at Headingley and exclusive matchday perks.
• Family: Annual passes to Merlin Entertainments’ attractions, tickets, food and drinks at Cineworld and Picturehouse Cinemas.

Moreover, with a Barclays Premier account, you can get free Apple TV, cashback on spending, improved savings rates, rewards like free drinks from GAIL’s, and 5% cashback at Tesco fuel.

However, in order to qualify for the Premier account, you will need:

• An annual income of £75,000
• At least £100,000 in savings or investments with Barclays

You will not be eligible for the switching offer if you opened an account with Barclays before 9 June 2026.

First Direct – get up to £200

First Direct’s switching bonus is offering new customers £200 if they open an account before 15 July. To qualify for the bonus, you will have to complete the following steps within 45 days:

• Deposit a minimum of £1,000 (in single or multiple deposits) in your account.
• Switch at least two direct debits or standing orders into your First Direct account.
• Register and log on to digital banking.
• Use your debit card at least five times.

Once all the steps are completed successfully, the £200 bonus will be paid to your account on the 20th of the following month.

You are not eligible if you've held an HSBC current account on or after 1 January 2018.

The account gives you access to its 7% regular saver. Plus, there are no fees when spending abroad, and the current account comes with a £250 interest-free overdraft, although this depends on your credit history.

Santander – get £180

Santander’s £180 switching deal is for both new and existing customers. To qualify, you must do the following:

• Complete a full switch using the CASS within 60 days of opening your account
• Pay £1,500 into the account either as a one-off payment or in instalments.
• Set up two direct debits in the eligible account.

Eligible accounts include Santander Everyday, Edge (£3 monthly fee), Edge Up (£5 monthly fee) and Edge Explorer (£17 monthly fee).

The bonus will be paid within 90 days of initiating the switch.

Existing customers can get the bonus by transferring £1,500 from an account held with a different provider to their new Santander account using the bank’s switch service. Plus, they will need to set up two direct debits.

Santander is closing 44 bank branches this year, so if your local branch is closing and you prefer in-person banking, it may not be suitable for you to switch to Santander.

Nationwide – get £175

Nationwide is offering a £175 bonus to new customers. You can get the cash by switching a non-Nationwide current account into a new or existing FlexPlus, FlexDirect or FlexAccount.

To qualify, you must complete the following:

• Use the CASS to complete a full switch within 28 days.
• Pay in at least £1,000 and make at least one debit card transaction within 31 days.
• Switch over a minimum of two Direct Debits.

You’ll receive the bonus within ten days of meeting all the requirements.

Alongside the new switching offer, Nationwide has also launched a 5% Member Exclusive Bond and has started paying its £100 Fairer Share bonus to over four million members for the fourth consecutive year.

How to switch bank accounts

The Current Account Switch Service makes it quick and painless to switch banks, as the banks are required to do the legwork and complete the switch within seven working days. All you do is open a new current account and request a switch via CASS. The service will then close your old account and move all your money, direct debits and standing orders to your new account within seven days.

Plus, for three years, any money that is paid into your old bank account or tries to leave that account will automatically be put into your new account. Still, it is important to remember that while these offers might look attractive, you should only switch to an account that suits your needs, as some accounts may also charge a monthly fee.

You should always check the terms and conditions to make sure you qualify for the bonus before you start the switch process. If you're applying for any credit in the next six months, such as a mortgage, it's also worth being aware that switching bank accounts could affect your credit score.

HSBC has launched a five year fixed-rate mortgage with a rate of 3.99% – the first product to offer a rate lower than the Bank of England’s base rate since the mini-Budget in September.

Mortgage rates hit a peak of 6.65% in September, and though they have since begun to fall they remain a far cry from the 2% rates we saw at the end of 2021.

The average two-year fixed rate mortgage is currently 5.43% while the average five-year fixed rate deal sits at 5.15%, according to analyst Moneyfacts.

The increased rates are partly due to the Bank of England’s series of rate rises. On 2 February it raised the base rate to 4%, marking its tenth consecutive increase. Increased rates have contributed to the property market’s slowdown.

Indeed, mortgage borrowing fell by £1bn between November and December as buyers questioned whether now was a good time to buy a house.

So, the news of a 3.99% product will be welcome by buyers struggling with higher mortgage repayments on top of rising energy bills and the cost of living crisis.

Here’s what you need to know about HSBC’s latest product.

How does HSBC’s 3.99% fixed mortgage deal work?

HSBC is offering a rate of 3.99% on a five-year fixed rate mortgage. It comes with a fee of £999, and customers will need a 40% deposit.

It’s only available to customers who are remortgaging, meaning first time buyers can’t take advantage of the rate.

The good news is HSBC is likely to be the first of a few providers to offer better rates. Lenders including Santander, Barclays, Halifax, Nationwide and Virgin Money have all made cuts to their mortgage rates as they try to draw buyers back in.

Additionally most lenders have priced in the BoE’s expected rate rises, meaning the rates on their products are unlikely to change much.

There are also some things to consider when fixing your mortgage. Inflation is expected to have peaked, and the base rate isn’t expected to climb above 4.5%. This could see mortgage rates drop further, resulting in better deals down the line.

It’s why some homeowners are opting for tracker mortgages instead. These products track the base-rate, and because they are not fixed offer the opportunity to switch whenever a more appealing product comes out.

But uncertainty around property prices and mortgage rates looks set to remain, especially as the cost of living crisis continues to impact household budgets, so it’s important to consider your individual circumstances before making any decisions.

The Treasury Select Committee has grilled the bosses from the UK’s “big four” largest banks over why savings rates are so low, despite Bank of England base rate sitting at 4%.

Barclays, Lloyds, NatWest and HSBC were questioned by the cross-party committee on a wide range of issues, including savings rates, mortgage rates, bank branch closures, changes to financial regulations and even how homeowners in flood-risk areas are treated.

The committee of MPs said it was important to explore whether banks are boosting their profits by increasing the gap between the interest paid to savers and the interest paid by borrowers.

For example, variable-rate mortgage holders were paying over 4% interest at the end of 2022, up from 2% at the start of the year, according to Bank of England data. But the interest earned by savers with fixed-rate cash ISAs only rose from 0.5% to 1% in the same period.

The measly rise in savings rates by some of Britain’s biggest banks is at odds with the big rise in base rate, which has soared from a record low of 0.1% to 4% in just 14 months.

As the committee noted: “Customers of Barclays, HSBC, Lloyds Banking Group and NatWest Group can expect to earn between 0.5% and 0.65% interest on basic savings accounts. MPs on the committee will ask why these rates are so low, and whether banks can be doing more to advise customers on how to arrange their funds to maximise the return they receive.”

Harriett Baldwin, chair of the Treasury Committee, added that “public scrutiny of our largest financial institutions is vital” and that it was important to question the leaders of the UK’s biggest banks “on issues of fundamental importance to our constituents”.

Customer inertia over savings accounts

The committee asked the bank bosses whether they rely on customer inertia over moving to better products.

The Evening Standard reported that Matt Hammerstein, chief executive at Barclays UK, replied: “I definitely refute the idea that we rely on inertia, I don’t think that’s in any way representative of the way we design products or the way we engage customers.”

Meanwhile, Ian Stuart, chief executive of HSBC UK, said: “We actively reach out to customers. Five and a half million emails went out recently to customers… we’re actively trying to bring customers on to the good savings products that we’ve launched.”

“I would argue the vast majority of our customers do shop around.”

Lloyds Banking Group chief executive Charlie Nunn told the hearing: “When you look at instant access savings, we see between 5% to 7% of all of our balances churning – moving between our competitors – every month. So it’s one of the most actively moved products or services that we have.”

Mortgage rate volatility

The bosses were also asked about the mortgage market after rates jumped last autumn amid market volatility.

According to the Evening Standard, Alison Rose, chief executive of NatWest Group, said there was “huge disruption during the mini-Budget when we saw gilts and the swap rate grow very quickly”.

She added that, while mortgage rates are coming down, the bank is helping customers look at their balance sheets “and find the right answer for them”.

The average two-year fixed-rate mortgage is now 5.79%, according to the data provider Moneyfacts. In December, the average rate was 6.01%.

Bank branch closures

There has been a string of bank branch closure announcements recently, and the MPs were keen to find out the extent to which access to cash is impacted by branch closures.

Lloyds and Halifax recently announced they would close a further 40 branches this year, while Barclays said it would shut another 15 branches. Last year, HSBC said it would shut the doors to 114 branches from April 2023.

Ian Stuart at HSBC told the committee the bank was “absolutely committed to a physical footprint in the UK”.

He added: “We think it’s important, but we have to get it scaled properly for the long term.

Stuart said 98% of HSBC’s transactions in December were digital.

Charlie Nunn at Lloyds Banking Group told MPs: “We remain very committed to our branch network.”

Alison Rose at NatWest Group said the bank was seeing “significant shifts in customer behaviour”, adding: “But we recognise we need to look after all of our customers and make sure that we support particularly vulnerable customers.”

The committee also discussed the government’s ‘Edinburgh Reforms’ to financial services, with the chief executives giving their views on plans to relax the ring-fencing regime, which separates retail from investment banking.

Meanwhile, the MPs voiced concern about how homeowners living in a flood-risk area were treated, for example in terms of insurers doing risk assessments and mortgage providers carrying out valuations.

Why haven’t savings rates kept pace with Bank rate increases?

While the Bank of England base rate acts as a guide to banks and building societies over whether they should change their savings rates, there is a stronger force at play: what their competitors are doing.

“No bank is going to hike rates dramatically above the highest rival, as they only need to nudge it slightly over their competitor’s offering to win business,” explains Laura Suter, head of personal finance at the investment platform AJ Bell.

She adds: “On top of this, banks are very keen to protect their profits, which comes at a cost to UK households. While mortgage rates have shot up, savings rates haven’t risen by nearly as much and some banks are worse than others for pocketing the difference rather than boosting savings rates. Banks make money on the difference between what they charge those borrowing money and what they hand over to savers – the bigger the difference, the bigger the profits.

“Banks are also concerned about what’s coming in the rest of the year. A recession means people losing their jobs, which in turn means more people defaulting on their mortgage or other debt, which is a cost for banks. A similar trend will be seen in the commercial market, with businesses defaulting on loans. Many banks are preparing for a wave of defaults and trying to shore up their balance sheets in anticipation.”

How to get the best savings rate

According to Suter, lots of people stashed away cash during the pandemic and many are still sitting on these cash pots, often in their current account or in old savings accounts paying very little interest.

Even if your savings rate was one of the best a year ago, it probably isn’t now, and it pays to shop around.

As Bank rate has risen over the past year, there has been something of a savings war, especially among challenger banks and building societies.

If you hunt around for a better deal you can get more than 3% for easy-access, up to 7% for regular savings and more than 4% for a one-year fixed-rate account.

Check out our round-up of the best savings accounts on the market.

Suter says savers are starting to vote with their feet. “The latest Bank of England figures show that in the final two months of 2022, savers took £7.7bn out of easy-access accounts paying little or no interest and at the same time funneled £17.3bn into fixed-rate accounts, where rates have shot up.”

National Savings & Investments (NS&I) has relaunched its one-year fixed bonds in a bid to lure back savers into the government-backed bank.

NS&I is offering rates up to 4%, making the bonds a strong contender against the best one-year fixed savings accounts.

Currently, the highest fixed savings account via Santander gives the same amount of return, unless you bank with Barclays, where existing customers can earn over 5%.

The Guaranteed Growth Bonds and Guaranteed Income Bonds are available for general sale for the first time since 2019.

From 1 February Guaranteed Growth Bonds will allow savers to earn 4% gross AER, while Guaranteed Income Bonds will offer 3.9%. These are the best rates both have offered since 2010.

The relaunch of the bonds follow recent increases to savings products and the interest rate on its Premium Bonds, which will see more winners in the February premium bonds prize draw.

Customers looking for the best savings accounts have benefitted from the Bank of England’s interest base rate rises, which has seen some banks increase their interest rates.

But those happy to lock their cash away for a year have another option and can benefit from the safety associated with NS&I’s Treasury backed guarantee, which exceeds the £85,000 cap set by the Financial Services Compensation Scheme.

How much can I save in NS&I bonds?

NS&I’s one year bonds have a minimum investment of £500, and a maximum of £1m.

If you’re looking for a short-term home for your cash holdings, the 4% rate looks competitive and is protected with the government seal of safety.

NS&I increases rates for existing customers

If you are an existing fixed rate bond holder, you can also benefit from the new rate.

Nearly half a million one, two, three and five year Guaranteed Growth Bonds, Guaranteed Income Bonds and Fixed Interest Savings Certificates accounts will also benefit from the new interest rates when their Bonds and Certificates mature if they decide to reinvest at maturity.

The two, three and five-year products are only available to existing customers with maturing products.

“With talk that savings rates may be past their peak, today’s news from NS&I will come as welcome news to savers looking to get the most by tying up their cash,” says Helen Morrissey, senior analyst at Hargreaves Lansdown.

“Savings rates have been starting to slide down in recent months, but these products are competitive and come off the back of further rate hikes for other NS&I products in the last few months.”

NS&I chief executive Ian Ackerley said the NS&I has “continued to respond to the current market to ensure that NS&I’s products are priced appropriately when compared with the rest of the savings market.

“This also ensures that NS&I continues to balance the interests of savers, taxpayers and the broader financial services sector.”

If your local bank or building society branch has closed recently - or is set to close soon - you’re not alone.

While you can switch bank accounts to find one that has a branch near to you, it is certainly getting harder to tick that box.

Thousands of bank branches have closed in recent years. Lloyds and Halifax recently announced they would close another 40 branches this year, while Barclays said on Saturday it would shut another six branches. Last year, HSBC said it would close 114 branches from April 2023.

The banks say demand has fallen as more as more customers do their banking online and that customers can also use any of the Post Office’s 11,635 branches to carry out most banking tasks.

As branches close, you may see a new “banking hub” pop up in your local area, which allow people from different banks to deposit and withdraw money - we explain below where to find the six which have recently opened. 

We explain how banking hubs and banking pods work, where the new banking hubs will be, and what the alternatives are if your local branch has closed and you still want face-to-face banking.

What is a banking hub?

Banking hubs allow customers from different banks to deposit and withdraw money. They offer a counter service operated by the Post Office, where customers of all major banks and building societies can carry out regular cash transactions, Monday to Friday.

The hubs also provide dedicated rooms where customers can see community bankers from their own banks to discuss more complicated banking issues. The community bankers work on rotation, with a different banking provider available on each day of the week.

In total, there are plans to create 62 hubs, but only six have opened so far. These are in:

• Brixham (Devon)
• Cambuslang (South Lanarkshire)
• Cottingham (East Riding of Yorkshire)
• Rochford (Essex)
• Troon (South Ayrshire)
• Acton, London

The ATM network operator, Link, has also recently announced locations for eight banking hubs:

• Downham Market (Norfolk) 
• Shirebrook (Derbyshire) 
• Otley (West Yorkshire) 
• Sidmouth (Devon) 
• Newton Aycliffe (County Durham) 
• Porthcawl (Bridgend) 
• Withernsea (East Yorkshire) 
• Wellington (Somerset) 

 It is unknown when these particular eight banking hubs will open. We’ll update this article when we know more. 

“Access to cash and face-to-face banking services continues to be important for millions of people across the UK. Not everyone can or is able to go digital yet, so we’re pleased to announce new cash services to support these communities,” said John Howells, chief executive of Link.

Link also announced the planned introduction of cash deposit machines in Keswick in Cumbria, Ripley in Derbyshire, Littlehampton in West Sussex, Whitstable in Kent, Dagenham in Greater London, and Colwyn Bay in Clywd.

There are plans for 38 new deposit services around the UK, where consumers and businesses can deposit cash without having to visit a bank branch.

On top of that there are plans for three fee-free ATMs to open up soon in areas where banks are closing down along with their ATMs. These will open in:

• East Horsley (Surrey)
• Newburn (Newcastle) 
• Ystradgynlais (Powys) 

What is a banking pod?

Barclays has announced it will launch a string of “banking pods” in response to changing customer needs.

The pods are purpose-built, semi-permanent structures in locations such as shopping centres and retail parks. They will provide a dedicated, private space, and can be moved depending on demand.

The pods differ to the shared banking hubs mentioned above, as the pods are only for Barclays customers.

At least 10 pods will be rolled out across the UK by summer 2023 following the success of the bank’s first one in St Austell.

The bank has not yet revealed the locations for the pods, but it says some of them will be areas without an existing Barclays presence.

In addition, six electric vehicle banking vans will be added to Barclays’ existing fleet of 10, enabling the bank to reach customers in remote locations.

The bank also said it is expanding its scheme where it works with local councils and communities to arrange a presence in places such as town halls and libraries.

“Our new banking pods and community pop-ups help us to tailor our in-person support for each location, including support with digital skills. In areas where we close a branch, we will maintain our presence in that community offering an alternative face-to-face solution,” said Jo Mayer, head of everyday banking at Barclays UK.

“They must be rolled out far more quickly”

Critics say banking hubs, pods, vans, pop-ups and any other types of temporary branches all need to be introduced quicker into communities struggling with a lack of banking services.

Jenny Ross, editor of Which? Money, said: “Cash remains hugely important for a significant minority who use it to pay for everyday essentials and keep track of their spending as the cost of living crisis goes on, yet banks such as Barclays continue to close hundreds of branches, making it harder for people to deposit and withdraw it.

“Proposals to plug gaps left by bank branch closures may well be part of the solution to protect access to cash, but must be rolled out in much larger numbers and far more quickly in order for people to feel their benefits.”

According to research by Which? last year, almost a quarter of free-to-use ATMs have vanished since 2018, while 4,685 bank branches have shut their doors - meaning almost half of the UK’s bank branches have closed since 2015.

My bank branch has closed. What are my options?

If your local branch has closed, check to see if there is a shared banking hub near you, or if your banking provider has any community pop-ups. As well as Barclays, TSB also runs pop-ups for its customers, such as in libraries, town halls and churches.

If you have a Post Office near you, you may be able to use its banking services, such as withdrawing cash, depositing cash and cheques and checking your account balance, Customers of Halifax, Lloyds, TSB, Allied Irish Bank, AIB, Bank of Ireland, Bank of Scotland and Virgin Money can access the full range of manual and automated banking services at a Post Office. Other customers may only be able to use certain services.

There’s a handy table on the Post Office website showing which personal services and which business services are available to which banking customers.

Another option if you want to withdraw money and there’s no bank branch, Post Office or ATM near you is to get cashback in a shop. Some supermarkets and convenience stores offer cashback at their tills with your debit card - and you don’t need to buy anything. Type your postcode into the Link website to see your options.

Finally, you could switch to another bank or building society that does have a local branch (although be aware there’s no guarantee this won’t close too).

Changing current account could mean you find one that is better suited to you, for example, offering cashback on bills, an interest-free overdraft and/or a decent savings rate. Look out for banks offering a switching bonus, as this means you’ll bag some free cash too.

Wondering what to do with old £20 notes and £50 notes? While paper notes ceased to be legal tender in 2022 and can no longer be used for everyday transactions, you can still exchange them for the same value in polymer notes.

It’s worth checking any unused bags, wallets and even your children’s money boxes for old notes that are no longer in circulation.

We look at what to do with old £20 and £50 paper notes and where to exchange them.

Are paper notes still legal tender in the UK?

No, paper notes stopped being legal tender in October 2022 when they were withdrawn from circulation and replaced with polymer notes.

A spokeswoman from the Bank of England told the BBC that “all genuine Bank of England banknotes that have been withdrawn from circulation retain their face value” and there is “no expiry on the period in which we will exchange banknotes”.

What is legal tender?

According to the Bank of England, the term ‘legal tender’ means that if you offer to fully pay off a debt to someone in a form considered to be legal tender – without any contract specifying another form of payment – you cannot be sued by anyone for failing to repay the debt.

In simple terms, it’s the officially recognised money by law that works as a means to settle a debt or meet a financial obligation. It tends to be the national currency of a country, per Investopedia.

What counts as legal tender in the UK?

If you live in England and Wales, then Royal Mint coins and Bank of England notes are considered legal tender.

In Scotland and Northern Ireland, Royal Mint coins are accepted as legal tender – but not the English banknotes. Both Celtic nations have their own banknotes, issued in the two countries by authorised banks.

As for coins, it’s slightly complicated. For instance, 1p and 2p coins count as legal tender for any amount up to 20p, while 5p and 10p coins are for any amount up to £5. £1 and £2 coins are acceptable for any amount.

You will also find that most of the common payment methods, like debit or credit cards, contactless payments, or paying by cheque, are not legal tender. We look at how to pay with a cheque in a separate guide.

Where can I exchange old banknotes?

There are various places you can take old £20 and £50 paper notes. Depending on where you live, some locations may be easier to access than others.

It’s also worth noting that you won’t receive the next series of banknotes featuring British wildlife just yet – replacing historical figures like Winston Churchill and Jane Austen for the first time in over half a century.

Instead, you’ll receive current polymer banknotes featuring King Charles III or the late Queen Elizabeth II, as they remain legal tender.

At the Bank of England

One option is to take the old paper notes to the central bank.

There is currently no time limit when it comes to exchanging your old UK banknotes at the Bank of England. However, you may need to present an original photo ID and proof of address when exchanging notes.

You can do this in two ways:

• In-person: You can swap your old notes at The Bank of England Counter, on Threadneedle Street, London. The counter is open between 9:30am and 3pm on weekdays (excluding bank holidays). Do be aware – even though the last entry is at 2:45pm, you may not be served if it has reached capacity after midday.
• By post: This is done at your own risk, and you may want to insure yourself against loss before sending banknotes in the post. The Bank of England website states that they are currently taking up to 90 working days to process postal banknote exchanges – so this method is only suitable if you don’t need the cash in a hurry. You’ll need to fill in a postal exchange form and send photocopies of your proof of ID and proof of address if you’re exchanging more than £700. It’s also worth tracking your post as the bank states that it cannot confirm receipt of postal exchanges.

At the Post Office

There are 53 Post Office branches across the UK that will let you swap your old banknotes for new polymer ones – even if you don’t have a bank account.

These are the notes you can exchange at a Post Office:

• £5 note – ceased to be legal tender on 5 May 2017
• £20 note – ceased to be legal tender on 30 September 2022
• £10 note – ceased to be legal tender on 1 March 2018
• £50 note – ceased to be legal tender on 30 September 2022

You can exchange up to the value of £300 every two years. You will need to show a form of photo ID so that the Post Office can keep track of how much you exchange and that you do not exceed the limit.

Valid forms of photo ID include your passport, driving license or a national identity card.

Find all the participating Post Office branches where you can exchange old notes.

At a bank or building society

Different banks have their own rules in place covering how they will handle paper banknotes. While some are happy to exchange them for new polymer notes, others are not so understanding.

Banks and building societies happy to exchange the old notes include Halifax, Lloyds Bank, Nationwide, Barclays, NatWest and Santander.

Banks that let you exchange paper notes will generally allow you to deposit the money into your account with them.

In some cases, you can still exchange the paper notes even if you don’t have an account with that particular bank, for example, with the Bank of Scotland and Virgin Money.

Can I exchange old coins for new ones?

Old £1 coins were demonetised in 2017, but you are still able to exchange them for new ones. We look at what to do with old £1 coins in a separate guide.

You can do this at your local high street bank, though it is entirely up to the bank whether they choose to accept the old tender. Retail banks which say they accept old coins include: Barclays, Lloyds, HSBC, Nationwide, Santander, and Virgin Money.

You cannot exchange old coins at the Bank of England. You can exchange your old coins at the Post Office, so long as they are in good condition.

Can I sell old notes and coins online?

You may find that some of your old notes and coins sell for more than their face value if they are part of special limited runs.

The Royal Mint issues gold coins, primarily for investment purposes, which you can also buy.

If you have a collectable coin, then you might decide to list it online on e-commerce platforms like eBay or Facebook Marketplace, or by selling it to a dedicated reseller. You could find that your old coins could be worth far more than you expect – here’s how to spot valuable coins.

However, just because coins are listed as rare on online marketplaces doesn’t mean they are worth that much money. The price of rare coins is determined entirely by the market, and a sale is contingent on finding a willing buyer.

It is entirely legal for you to sell your old coins online or to a reseller, but make sure you do your due diligence to ensure you are not scammed. It is a good rule of thumb to use reputable platforms and insure your items.

If you’re planning a holiday abroad or often go on business trips, using the best cards for travel could help you make your funds go further.

There are many ways to save on holiday, whether it’s booking flights or buying travel money in advance.

But thinking about how you’ll pay for things on your trip is also important, as the wrong card could see you stung with high exchange fees.

You can avoid these charges by using a competitive travel card that comes with zero fees on foreign transactions. We have compiled a list of the best cards for travel abroad, and the host of perks they offer.

Best credit cards for travel abroad

If you are using a credit card, make sure you are in a position to pay off your bill in full at the end of each month. Otherwise, any interest charges will cancel out any benefits.

Lloyds Ultra Credit Card

This card from Lloyds comes with a low APR rate and there is no cap on how much cashback you can earn.

• 1% cashback on all card purchases in the first year, 0.25% after
• No foreign exchange fees or ATM withdrawal fees
• Representative APR and purchase rate of 12.9% (variable)

Barclaycard Rewards Card

• No fees on purchases abroad if paid in full
• 0.25% cashback on everyday spending
• No interest on cash withdrawals if paid in full
• Representative APR and purchase rate of 28.9% (variable)

NatWest Travel Reward Credit Card

• 1% cashback on eligible travel spending
• Or up to 15% cashback at select partner retailers
• Or 0.1% back on all other spending
• No foreign transaction fees on purchases abroad
• 3% fee on ATM withdrawals (minimum £3)
• Representative APR and purchase rate of 27.9% (variable)

Virgin Money Travel Credit Card

• 1% cashback on spending for the first 90 days, 0.25% cashback after that (up to £15 cashback per month)
• No foreign exchange fees overseas
• Representative APR 27.9% (variable)
• Up to 15% additional cashback with select retailers
• ATM withdrawal fees of 5% applies plus interest charge until repaid in full

Santander Edge Credit Card

• 1% cashback (max £10 per month) on all purchases
• No foreign exchange fees on purchases overseas if spent in local currency
• £4 monthly fee
• Overseas ATM withdrawals have a 3% fee (minimum £3)
• Representative APR 37.8% and purchase rate 29.9% (variable) until fully repaid

If you are applying for a credit card, always go through an eligibility checker, like the Card Match tool from our sister site Go.Compare.

We look at the best American Express credit cards and the best credit cards for airport lounge access in separate guides.

Best debit cards for travel abroad

We look at some banks that do not charge fees when using your debit card abroad. However, there may still be ATM withdrawal fees, often set by the ATM provider.

Chase Debit Card

• 1% cashback on eligible spending for the first 12 months (max £15 per month)
• Note: no cashback on overseas spending
• Fee-free spending and ATM withdrawals home and abroad

Chase also gives you access to its 2.25% (variable) easy access saver. However, the interest rate is quite low, so it’s worth checking out our best easy-access savings accounts guide for the top-paying accounts.

First Direct Debit Card

• Fee-free spending abroad
• Fee-free ATM withdrawals abroad, up to £500 per day
• £250 interest-free overdraft

You could get a £175 bank switching bonus for moving your current account to First Direct, and access a 7% regular savings account.

Starling Bank Travel Money Card

• No fees on spending abroad
• No fees on cash withdrawals abroad
• Manage in-app and online
• Maximum £300 ATM limit and six withdrawals per day while abroad

Monzo Debit Card

• Fee-free spending at home or abroad
• 0% interest on purchases over £100 or more paid over three months
• Otherwise 29% APR representative (variable) for up to 24 monthly payments

Make cash withdrawals of up to £200 outside of the EEA every 30 days for free. Anything over that incurs a 3% charge. You can also earn 2.75% AER (variable) with an Instant Access Savings Pot.

Cashback credit cards give you rewards on your everyday purchases, paying you a percentage of what you spend. If you pay off your statement in full every month, these cards can help you earn hundreds of pounds worth of rewards each year.

The rewards you earn can build up over time, but make sure you pay off your balance in full, otherwise interest charges may outweigh the perks.

These cards usually come with a cap on the amount of cashback you can earn, and note that some have a monthly fee.

We look at the top credit cards for cashback to help you make the most of your spending.

What are the best cashback credit cards?

How do cashback credit cards work?

If you have a credit card that gives you cashback at a rate of 0.5%, for every £100 you spend, you get 50p back. As attractive as the promise of free money sounds, there are downsides, too.

Credit card companies may offer attractive cashback rates for only a fixed period of time, such as the first five months. In order to get the most out of using cashback credit cards you need to be mindful of two things: it may be beneficial to use them for all your spending (but watch out for credit card fees with any purchases) and you must pay off the full amount every month.

The introductory cashback offers could be useful if you know you're going to be buying something expensive. But if you carry a balance over just once, the resulting interest charge could wipe out any cashback you get.

Cashback credit card providers can charge a fee and typically offer uncompetitive interest rates. Some also require a minimum spend before you can generate cashback savings.

As with any credit card, be careful to pay it off in full to avoid being charged interest, and always check the terms and conditions to make sure the card is the right one for you.

Balance transfer credit cards can slash the costs of existing credit card debt and could save you thousands by reducing the interest you pay.

These cards allow you to transfer debt from one credit card provider to another at 0% interest — as long as you keep up with monthly payments and do not use the card for purchases.

Kalpana Fitzpatrick, MoneyWeek’s digital editor, says: “Balance transfer cards can help you clear out existing debt at no extra cost and are great for those that have existing credit card balances.

“But, keep in mind you will need a good credit score to get the top deal and there are often transfer fees to pay, so this only makes sense if you have a fairly large balance and you can pay it off in the 0% period.”

If you’re looking to reduce your credit card debt this year, banks are offering some of the longest deals of more than 30 months with 0% interest on balance transfers.

According to financial ratings expert Defaqto, 12 credit cards are offering more than 30 months with no interest in 2026, while only three such deals were available at the beginning of last year.

We round up the best 0% balance transfer credit cards on the market now.

Balance transfer credit cards vs money transfer credit cards

While both types of cards might sound similar, they serve two different purposes.

Balance transfer credit cards let you shift any outstanding balance from a current card to one with a lower or 0% interest rate, meaning that you can pay off the balance faster.

In contrast, money transfer credit cards allow you to move funds directly from a card into your bank account. This is usually done with a 0% interest rate for a set period of time to help you clear an overdraft or an outstanding bill.

The best 0% balance transfer credit cards

Here are some of the best 0% balance transfer cards on the market.

Cards with the longest offer

Source: Defaqto

TSB Platinum Balance Transfer Card

This is currently the top deal on the market, with the longest duration of up to 38 months. Here’s what you get:

• Up to 38 months, 0% interest on balance transfers, then rate jumps to 24.9% APR
• 3.49% transfer fee
• 0% on purchases for three months, then rates vary
• The minimum you can transfer is £100, up to a maximum 95% of your credit limit from UK cards
• To benefit from the balance transfer offer, it needs to be taken out within 90 days of opening the account.
• You can’t make a transfer from any other TSB cards.

Existing customers can apply on the TSB app.

Barclaycard Platinum Balance Transfer

• Up to 36 months, 0% interest on balance transfers
• 3.45% transfer fee
• 0% on purchases for three months. After the promotional period, a monthly rate of 1.87% or annual rate of 22.44% applies
• To benefit from the balance transfer offer, it needs to be taken out within 60 days of opening the account.
• The minimum you can transfer is £250 across up to five balance transfers. The maximum transfer will be 90% of your credit limit.
• You can’t make a transfer from any other Barclaycard or partner cards.
• After the 0% period, the interest rate jumps to 24.9% APR

New customers can also get £20 cashback when they transfer at least £2,500 within 60 days of opening the account. On top of that, you can get a free 12-month Apple TV subscription. This offer will end on 29 January 2026.

Tesco Bank Balance Transfer Credit Card

• 36 months, 0% interest on balance transfers, then 24.9%
• 3.45% transfer fee
• 0% interest on money transfers for nine months, with a 3.99% transfer fee
• You can transfer up to 95% of your available credit limit

You may receive a purchase rate of between 24.9% to 29.9% variable, depending on your circumstances. If you use your card for spending, you won’t be charged any interest, provided you pay off the balances that aren’t on a 0% rate in full each month.

You can pay with your card in or outside of Tesco and collect Clubcard points. You get five points for every £4 spent using a Clubcard Credit Card at Tesco, one point for every £4 spent, one point per litre of Tesco Fuel, and one point for every £8 spent.

Virgin Money Balance Transfer Credit Card

• Up to 35 months, 0% interest on balance transfers, then 27.9%
• To benefit from the balance transfer offer, it needs to be taken out within 60 days of opening the account.
• 0% interest on purchases for three months, then 27.9% variable
• Transfer up to 95% of your credit limit
• 2.95% transfer fee
• You can't make a transfer from another Virgin Money credit card

Virgin’s balance transfer credit card comes with a relatively high transfer period and a lower transfer fee compared to other providers.

HSBC Balance Transfer Credit Card

• Up to 35 months, 0% interest on balance transfers, then rate jumps to 24.9%
• To benefit from the balance transfer offer, it needs to be taken out within 60 days of opening the account.
• 3.19% transfer fee (minimum transfer of £5)
• 0% on purchases for three months, then rate jumps to 24.9%
• You won’t be eligible if you hold an HSBC Basic Bank Account.

Cards with no or low transfer fee

There are options available for customers who want a 0% balance transfer card with no transfer fee. We round up the options.

Barclaycard No Fee Platinum Balance Transfer Credit Card

• No fee to transfer a balance for up to 14 months
• 0% interest on balance transfers
• 0% interest on purchases for three months
• After the 0% period, the interest rate jumps to 24.9% APR for both balance transfers and purchases
• No monthly account fee
• To benefit from the offer, you must transfer within 60 days of opening your account.

Natwest Balance Transfer Credit Card

• Up to 12 months, 0% interest on balance transfers
• Balance transfers must be made within three months of opening the account
• No fee to transfer
• 0% interest on purchases for three months
• Minimum transfer of at least £100
• Can transfer up to 95% of your credit limit
• After the 0% period, the rate changes to 24.9% for both balance transfers and purchases

Santander Everyday No Balance Transfer Fee Credit Card

• Up to 12 months, 0% interest on balance transfers
• No fee to transfer a balance for the first 12 months
• No monthly account fee
• 0% interest on purchases for three months
• After the 0% period, the interest rate jumps to 24.9% APR for both balance transfers and purchases

You shouldn’t already have another Everyday credit card, and you can’t transfer balances from other Santander or Cahoot credit cards.

Santander All in One Credit Card

• 15 months, 0% interest on balance transfers and purchases
• No transfer fee
• £3 monthly charge to hold the account
• No foreign exchange fees on overseas purchases
• 0.5% cashback on all purchases (up to £10 a month)
• After the 0% period, the rate jumps to 29.8% APR for balance transfers and 23.9% for purchases

You won’t be able to transfer any balances from other Santander or Cahoot credit cards, loans or current accounts.

Tesco Bank Low Fee Balance Transfer Credit Card

• 0.75% to transfer a balance for up to 15 months
• 0% interest on balance transfers for 15 months
• 0% interest on purchases for three months
• After the 0% period, the interest rate jumps to 24.9% APR for both balance transfers and purchases
• 0% interest on money transfers for nine months, with a 3.99% transfer fee
• To benefit from the offer, you must transfer within 90 days of opening your account.
• Collect Clubcard points on spending

If your credit score isn't perfect, you might be offered less time to pay off the balance.

It’s also important that you only use the card to pay off the existing credit card debt and do not use it to spend — otherwise, you could face hefty interest charges. Failing to pay the minimum balance each month could mean you incur fines and damage your credit rating.

These are the most-traded shares across UK markets last week. The figures provide a great insight into the way investors are thinking and where there could be opportunities.

While this information is only a small sample of the UK stockmarket, it can provide a great starting point for further research.

Most-bought blue-chip stocks

Top five most bought FTSE 100 shares according to the UK’s largest online stockbroker, Hargreaves Lansdown:

The most-bought list of FTSE 100 stocks has been dominated by resource companies in recent weeks. However, last week it seems there was a big change in investor sentiment.

Commodity stocks are now seemingly out of favour. They’ve been replaced by blue-chip utilities, telecom, healthcare and retail.

Water is one of the market’s most defensive sectors. Not only is there always a demand for water, but most companies have a monopoly over the regions they operate. They’re also usually able to hike bills in line with inflation. This makes them the perfect stocks to own to weather inflationary forces, which might explain why United Utilities was one of the most-bought FTSE 100 stocks last week.

GSK and Haleon also proved popular following sudden share price falls. Both companies are exposed to litigation related to the heartburn drug Zantac. This could lump the companies with multi-billion dollar legal bills, and the market has been selling the stocks rather than risk exposure to rising costs.

Most-bought small and mid-cap stocks

The most-bought non-blue-chip stocks on the Freetrade, IG Group and Hargreaves Lansdown platforms in no particular order:

It was a quiet week for small and mid-cap stocks last week.

Revolution Beauty Group bucked the trend, earning itself a place on the list of the most-bought stocks even though the firm warned investors that it could have to restate its financial position.

In a trading update published on 11 August, the company told investors that its auditors have “raised certain accounting issues with management,” in preparation of its accounts for the period ending 28 February.

The update noted that these issues could “have a material impact on the results,” although it is confident that its financial position reported at the end of July (net debt of £21.2m) is reliable and there’s plenty of headroom on its borrowing facilities to provide “sufficient liquidity” for the future.

Most-bought investment trusts

Top five most bought investment trusts according to Barclays Smart Investor:

Scottish Mortgage remained the most popular investment trust on the Barclays Smart Investor platform. But the others on the list suggest investors are preparing for a period of prolonged uncertainty, and they seem to be sheltering in trusts with exposure to green energy.

Greencoat UK Wind owns and operates a portfolio of wind farms around the UK. Meanwhile, the Renewables Infrastructure Group owns and operates a portfolio of renewable energy assets. In an increasingly uncertain economic climate, with rising hydrocarbon prices, money is flooding into green energy assets, which have the potential to offer secure, inflation-linked returns as well as a steady income for investors.

Sources:

https://www.hl.co.uk/shares/top-of-the-stocks

https://www.ig.com/uk/shares/most-traded-stocks-uk

https://freetrade.io/most-traded-shares#uk-most-traded-shares

https://www.barclays.co.uk/smart-investor/investments/most-popular/investment-trusts/

SEE ALSO:

Britain’s ten most-hated shares

Director dealings what company insiders are buying and selling

No board of a FTSE 100 company wants to hire a below-average chief executive. Hence boards pay above-average rewards to CEOs who they believe are above average. Yet, mathematically not all CEOs can be above average.

One way to judge the real talent of a CEO is to see what they go on to achieve after they’ve left their position at the top of a major company.

Since Bob Diamond, former CEO of Barclays, resigned over the Libor rigging scandal, his record has been mixed, to say the least. In the mid-2010s, Diamond raised close to $1bn through his cash shell, Atlas Mara, to invest in the banking sector in Africa. The shares dropped like a stone and eventually Atlas Mara was delisted at the end of last year.

Diamond has more recently been involved with a special purpose acquisition company (Spac) that is trying to merge with cryptocurrency firm Circle. Perhaps Diamond was not as talented as the remuneration committee at Barclays believed?

Sorrell’s second act

Martin Sorrell, the former CEO of advertising agency WPP, was another boss with an outsized remuneration scheme who resigned under a cloud. In 2016, Sorrell’s £70m pay package caused a third of WPP’s shareholders to vote against the plan. He left in April 2018, amid accusations of bullying and suggestions he had blurred the line between personal and company expenses (allegations that he denied).

Some shareholders disliked the fact that Sorrell walked away from WPP as a “good leaver” – meaning that he kept his multi-million pound awards – yet was not required to sign a non-compete agreement. Within a couple of months Sorrell had found a new cash shell, Derriston, renamed it S4 Capital (LSE: SFOR) and raised £50m of cash to set about building a new media and advertising company for the digital age to take on WPP.

To prevent him being ousted, he owns a golden share that allows him to block any resolution proposed by other shareholders on acquisitions, disposals and executive appointments. The B share rights are negative (ie, they give him a veto). The prospectus mentions a risk that a disagreement over strategy could result in deadlock.

Early backers included hedge funds Tosca and Lansdown Partners – widely perceived as “smart money” in the City. S4’s first move was to acquire MediaMonks, a Netherlands-based advertising agency for €300m, and San Francisco-headquartered MightyHive – which uses algorithms to buy advertising and had a close relationship with both Google and Netflix – for $150m. In total S4 has made 30 acquisitions in the four years.

Tumbling shares

However, it’s been a difficult few months. The company delayed releasing its audited full-year results twice, as PwC, its auditors, flagged concerns. The Sunday Times revealed last month that the problems involved the fact that finance staff at Media Monks failed to accurately record sales on the accounting system. Among other issues, if staff needed to make a correction to an invoice generated by the software – which frequently happened – they would edit the invoice PDF rather than put it through the accounting system, which is what they should have done. So the accounts were not accurate, staff struggled to reconcile the system with the amounts clients had actually been billed. Employees raised concerns around audit risk.

The accounts were finally released last month. It looks like S4 management has now taken this seriously, with better systems and new hires. However, S4 Capital’s share price is down by more than 70% since its peak of 878p last September, wiping more than £3bn off its value. Investors will hope that Sorrell’s second act is more successful than Diamond’s African bank.

A more challenging advertising market

While much of the drop in S4’s share price reflects the delay in publishing the accounts – it dropped by more than a third in March after the second delay – the broader adtech industry has also sold off: Tremor is down 30%, while in the US, The Trade Desk is down 51% and Digital Turbine is down 75%.

Some of this is a reverse from the pandemic. People were spending more time on digital devices and the digital-advertising platforms benefited. Now people are outside again, some of that trend has been undone. But other factors are also at play: Alphabet will remove third-party cookies from its Chrome browser and Apple has allowed users to opt out of tracking.

S4’s first-quarter results shows net revenue up 65% to £171m (up 35% on a like-for-like basis). It expects net revenue to increase 25% this year, in line with previous guidance. Results are set to be weighted towards the second half, which means that if the economy weakens further there is a risk of disappointment. But for now, performance is in line with the group’s three-year plan.

Net debt was £48m at end March. Since S4 has used its own shares for acquisitions, the number of shares has grown from 365 million at end 2019 to 556 million at end 2021. There will be a further 33 million of share issuance, plus £51m of contingent consideration (based on the current share price) and a further £125m of cash consideration for previous acquisitions.

The shares are on 14 times forecast 2022 earnings, dropping to 11 on 2023 forecasts. That could be good value if it weathers the downturn. Still, there is a risk S4 has grown too fast and fails to integrate its acquisitions properly, as well as a more difficult advertising market. Growth has been very strong, but low single-digit profitability measures suggest that high growth needs to convert into more profitability at some point in the future.

Investors in Barclays got a nasty shock this week when the bank revealed that a US paperwork blunder will cost it around £450m. Put simply, Barclays messed up the administration requirements around the issuance in the US of financial products called structured notes and exchange-traded notes (ETNs).

So what went wrong? Any financial securities sold to the public in the US have to be registered with the US financial regulator, the Securities and Exchange Commission (SEC). As Bloomberg’s Matt Levine explains, this is usually done via a blanket “shelf registration statement”, which contains a “very large arbitrary number for how many securities you might sell”. In 2019, Barclays registered to sell just under $20.1bn of securities in a statement. The trouble is that apparently it forgot to keep track of how much of this $20.1bn capacity it had used, and ended up issuing a combined $36bn securities or so – around about $15bn in the last year – instead of $20bn, before realising its error.

A minor mystery solved

The error does appear to explain why Barclays stopped issuing new shares in two of its most popular ETNs – one tracking the Vix volatility index (VXX) and the other tracking crude oil prices (OIL) – a couple of weeks ago. This was at the height of market volatility around Russia’s invasion of Ukraine. The decision resulted in dramatic price moves for both the VXX and OIL products. The inability to issue new shares meant the ETNs could no longer track their underlying indices. Instead they become more like an investment trust – where the price is driven by supply and demand for the shares, and so can trade at an entirely different price to the value of the underlying assets – which, needless to say, is not the point of an ETN.

The £450m cost is due to the fact that, because the securities were issued in error, holders have “a right of rescission”. In other words, Barclays has to buy them back at the original sale price. Of course, anyone who made a loss on their structured notes, or perhaps on these two ETNs, will almost certainly exercise this right and get their money back at Barclays’ expense. As you’d expect, the bank is conducting a review into what went wrong.

We suspect that few MoneyWeek readers trade ETNs, and we’ve also railed against structured products often enough to dissuade you from them too. And in this rare case, investors may well have benefited from the error rather than lost out. But it’s another very good demonstration of why you shouldn’t invest in anything that you don’t understand thoroughly. If even a banks’ back office can’t get it right, what hope do you have?

It’s hard to believe now, but UK banks’ share prices had a strong start to the year, up between 15% and 25% until mid-February. They reported results for the financial year ending December 2021 at the end of last month, with no obvious problems. We saw profits rebound and outlook statements suggest improving revenue and further capital returns to shareholders in the form of dividends and share buybacks. Then Russia invaded Ukraine and NatWest’s, HSBC’s and Lloyds’ share prices fell by more than 20% from their 2022 highs. Barclays has been hit even harder, down 30%. They have since rallied somewhat, but still remain down by between 12% (HSBC) and 22% (Barclays).

Direct exposure to Russia plays little part in this. UK banks have $3bn exposure to the Russian financial system, according to the Bank of International Settlements (BIS). While $3bn may sound like a lot of money, Austria (mainly Raiffeisen) has six times more exposure at $18bn. French (mainly Societe Generale) and Italian banks (Unicredit and Intesa Sanpaolo) have eight times more exposure at $25bn each. Societe Generale has said that it would be able to withstand the extreme scenario of having its Russian bank confiscated by the authorities, but so far banks have admitted losses that are in the tens of millions, not tens of billions.

Following the 2008 financial crisis, lenders are in much better shape to absorb losses, mainly because regulators demanded that they rebuild their capital ratios and fund with more equity. Excluding NatWest – which has sold businesses and shrunk total assets by a trillion dollars – the sector has now increased tangible equity funding by around $90bn in the last ten years. In total, UK banks have $420bn of equity to absorb losses. So while $3bn UK bank direct exposure to Russia might sound like a lot of money, it really isn’t compared with the equity on their balance sheets, and is much less than that of European competitors.

Reassuring results

Results for the 2021 financial year were reassuring. Bank profits have been in long-term decline, but recovered in 2021. This was driven by lower bad debts compared with 2020, because banks took large provisions at the start of the pandemic and found that bad debts weren’t as high as the worst-case scenario. Hence statutory profit before tax doubled at HSBC and trebled at Barclays. The two banks the government rescued in 2008 fared even better, with Lloyds increasing profit before tax sixfold and NatWest recovering from a loss in 2020 to report a £4bn profit.

All UK banks have profitability (as measured by return on tangible equity – ROTE) targets of 10% or above and the outlook statements (which were written before the Russian invasion) sounded more confident that these can be achieved. For instance, HSBC said that it was likely to achieve at least 10% ROTE in the 2023 financial year, a year earlier than it had previously expected. Barclays and Lloyds already exceed their targets, reporting 13.4% and 13.8% ROTE respectively. This was helped by each bank’s revenue performance, but also a £0.7bn impairment release for Barclays and a £1.7bn release for Lloyds.

NatWest announced a £750m buyback; Barclays £1bn and Lloyds £2bn. The Asian-focused banks (HSBC and Standard Chartered), which are reporting lower returns and were trading on lower price to tangible book multiples, announced $750m and $1bn buybacks respectively. However, those buyback announcements have done little to support share prices. Since the obvious exposures to Russia’s economy are manageable, it’s the secondary and tertiary effects that share prices are responding to, and that’s what we should be thinking about as well.

Central banks have been slow to tighten

Merryn interviewed Andy Haldane, previously the Bank of England’s chief economist, for the MoneyWeek podcast in July last year. Haldane worried that other central bankers were too relaxed about the risk of inflation and that its effects might not be transitory. In June last year he was the only member of the Bank’s monetary policy committee (MPC) to vote to raise interest rates. He suggested that inflation could exceed the Bank’s 2% target for longer than most people expected, which would result in central bankers’ credibility being questioned.

Although central banks were slow off the mark in tightening policy, by the start of this year the strength of the post-pandemic economic recovery meant that most analysts were expecting to see steadily rising interest rates. You may be wondering: if interest rate rises have been expected, why the panic now?

Ultra-low interest rates are no good for banks, because banks make money from lending out their deposit funding. In normal times, customers’ deposits (which are liabilities on banks’ balance sheets) represent a cheap and stable source of funding. However, when interest rates are below 1%, banks don’t derive any benefit from this deposit funding, because there’s so much other liquidity freely available. As interest rates rise, banks will be slow to pass on the benefit to savings customers. Instead, net interest margins will widen (which is better for shareholders than it is for customers). As long as central banks are responding to a strong economy, rising interest rates are good news.

That was the bull case. But Russia’s invasion of Ukraine and the oil price rising to over $120 per barrel has changed the outlook.

The threat of stagflation

HSBC warned in its annual report that “further increases in energy prices – for instance, as a result of escalation in the Russia-Ukraine crisis – could keep inflation high and force central banks to tighten monetary policies faster than currently envisaged”. During the global financial crisis of 2008-2009, oil peaked at almost $150 per barrel – trebling from the $50 per barrel it traded at in January 2007. At the time a wiser, older broker told me: “Oil has never trebled in value and not caused a recession”. It wasn’t different that time and it probably won’t be different this time.

The problem is that we may see consumers’ disposable incomes being squeezed by higher commodity prices, rising inflation and rising unemployment all at the same time. That is what happened in the 1970s and it’s known as “stagflation” (stagnation + inflation). History shows that while quantitative easing might have helped stimulate growth from 2008 onwards, central banks can’t print their way out of a commodity shock. Longer term, rising inflation combined with rising unemployment is unambiguously negative for banks’ share prices. Any benefit from higher interest rates would be wiped out by bad debts.

These are the risks that share prices are reflecting. And if we see stagflation, investors should avoid the sector altogether. But if these fears are overstated, there could be some value in banks at this point.

The case for NatWest – Britain’s worst bank

A common-sense investment strategy is to pick a sector with favourable long-term prospects and buy a company from that sector that has favourable economics. An example might be Halma or Spirax Sarco in the engineering sector.

When it comes to UK banks, common sense works less well. The “quality” bank with the best long-term record is HSBC, whose share price has halved in value in the last 20 years. It’s not much good to point out that in relative terms HSBC has done better than the competition: Lloyds and NatWest were part-nationalised and shareholders diluted by the government in 2008. Barclays has fared little better, with the shares down by 70% compared with 20 years ago. In short, banks have not been “buy and hold” investments. With that in mind, I would suggest a different, counter-intuitive approach: wait until the tide is on the turn and then buy the lowest-quality bank, which is NatWest.

Expectations are low: NatWest lost money for nine consecutive years following the financial crisis. However, NatWest has essentially been three businesses i) a non-core shrinking “bad bank”; ii) good businesses that it was forced to sell as a result of receiving state aid (eg, Direct Line Insurance); and iii) a profitable core franchise. The years since the financial crisis have been dominated by the first two factors, but by their nature they have declined in importance and the core franchise should become more important.

NatWest’s annual report shows the bank should benefit by almost £1bn from a one percentage-point parallel shift in the sterling yield curve (that means short-term rates rise as the Bank of England raises the base rate, but the ten-year bond yield – which central banks don’t control – goes up by the same amount). That’s an automatic benefit equal to 25% of last year’s profit before tax of £4bn. As long as the yield curve remains upward sloping – meaning short-term rates (eg, 2%) remain lower than longer-term bond yields (eg, 4%) – some of that benefit is sustainable in future years.

Aside from the macro-economic background, there are still company-specific concerns. For instance, last year NatWest paid £466m of “conduct costs” for the financial year 2021, including £265m for money laundering for a Bradford jeweller that deposited £260m in cash, some in bin bags with a “musty smell”. Many of these problems were the result of cultural failings – and as the bank shrinks, it should become easier to avoid these hangovers from the past. Note also that the UK government still owns 52% (down from 97% in 2008), but not all of these shares are being placed on the market. Instead, NatWest is buying back from the government at the market price.

NatWest is trading on 0.5 times revenue and 0.6 times tangible book value. The forecast price/earnings ratio is less than six times forecast 2023 earnings, according to SharePad. That suggests investors believe it will deliver returns well below management’s target of 10% ROTE. But having shrunk its balance sheet by over £700bn in the last decade, the bank has been de-risked. The share price currently looks to be anticipating a very difficult stagflationary environment. The Ukraine war and sanctions may drive that scenario – but if we see commodity prices fall, that would be the signal the tide has turned, and would be the time to buy.

Many small businesses face the same dilemma: improved performance since an easing in the Covid-19 crisis has lifted confidence and encouraged expansion – but committing to investment in growth is difficult at this time. Around 40% of small and medium-sized enterprises want to hire new staff before the end of March, but almost two-thirds are worried about spiralling inflation, according to recent research by Barclaycard.

These are uncertain times for many business owners. If they hire new permanent employees to take advantage of growth opportunities, will they regret that decision in a few months’ time? If taking on new staff doesn’t drive revenue growth quickly enough, firms may struggle to cope with cost pressures. The worst-case scenario is they end up having to lay off new hires, with all the expense and stress that cutting jobs entails.

But taking on a permanent member of staff is not the only way to expand your business’s capacity. Several alternatives will give you more flexibility.

Don’t plan for the long term

Hiring contractors could be a good option. If you have a specific piece of work that needs doing, with limited capacity in-house, a contractor could help you bridge the gap. You hire them for the duration of the project, with no commitment to extend the contract once the work is complete.

This approach has cost advantages as well as providing agility. You agree a fee for the work that needs doing, but you are not usually expected to cover the cost of additional benefits or to give contractors paid holidays. Just make sure you understand the IR35 tax rules, which prevent companies hiring contractors who are really just operating as employees.

Another possibility is to take on employees on fixed-term contracts. You’ll typically need to pay these staff in the same way as your other employees (and to pay employers’ National Insurance), but you bring them in a for a set period, depending on the visibility you have of your pipeline of work. When the picture becomes clearer, you can decide whether to offer more permanent roles.

Freelancers can also give your business greater flexibility to cope with unpredictable workflows. You would typically hire them on a more ad hoc basis than contractors, paying them for one-off tasks as and when these come up. It makes sense to build relationships with a bank of trusted freelancers that you can turn to when needed, but you could also look on sites such as PeoplePerHour or Freelancer.

Internships are another solution. These workers come in for short periods in order to secure experience that will help them in their chosen careers. You will need to think carefully about what you will pay such staff – some employers offer internships with no pay at all, while others choose to remunerate them. Paying nothing could be considered exploitative, particularly if interns are helping your business increase its revenues by expanding its capacity.

Alternatively, think about outsourcing work to another business. This model can work well if there are elements of your business that don’t justify taking on staff of your own, but still need delivering. Paying a third-party supplier to do this work on your behalf will give you the flexibility you need.

It’s also worth considering part-time employees. These will be less costly, and offering such roles can be a good way to access a wider pool of talent.

It all started with the Big Bang in 1986. That was Margaret Thatcher’s attempt to shake up the cosy relationships in the City of London and build a globally competitive financial services industry of which the country could be proud. The old separation between brokers and jobbers (market makers), and between retail and investment banking, were dismantled and cleared away – without much consideration of whether there were sound reasons for these divisions to exist, like Chesterton’s Fences.

Retail banks such as Lloyds, Barclays and Midland were allowed, if not encouraged, to own stockbroking firms. The likes of de Zoete Wedd, Hill Samuel and Samuel Montagu were bought by UK retail banks. Other brokers such as Phillips & Drew, Warburg’s and Smith New Court were bought by large investment banks from overseas. UK banks expanded into new territories and built empires where the sun never set. Banks attracted a new breed of rocket scientists and physicists to help them price complex derivatives. A new model emerged: “universal banking”, implying a bank could do everything under one roof. London became a centre of global financial competition.

The Big Bang was good for London as a financial centre, but there were two questions no one thought to ask: was it good for customers, and was it good for shareholders? The answer to both questions is an uncontroversial “no”.

Few benefits for customers

Barclays’ fixed-income division may have risen up the corporate-bond underwriting league tables, but it is hard to see how this brought any benefits to a Barclays current-account customer, for example. Even for retail banking products, having a current-account relationship with one bank doesn’t mean a better mortgage deal or cheaper home insurance. It is almost always true that customers do better to look at the best-buy tables than trust their bank to cross-sell to them. This is especially true of mortgages, where high house prices mean a large mortgage over 30 years is very sensitive to the interest rate offered, and hence customers would be mad not to go to a mortgage broker to find the best deals on offer. The same logic applies to credit-card customers, driven by eye-catching balance transfer rates. So using current accounts to cross-sell additional banking products has proved more difficult than universal bank management would like to admit.

It is even harder to see how a customer of what was once Midland and is now part of HSBC benefits from the parent company’s high market share in Hong Kong, let alone the ill-advised expansion into Mexico, Brazil, Argentina, or risky US subprime mortgages. It is patently ridiculous to claim that HBOS, the UK’s biggest mortgage lender, was somehow helping local borrowers in Halifax by also lending money to fund the buy-out of M Resort Spa Casino in Las Vegas in the run-up to the global financial crisis in 2007-2009. Indeed, HBOS’s management were securitising their high-quality UK mortgages and selling them in financial markets, and replacing these assets with collateralised debt obligations (CDOs) sold to them by US investment banks, which contained packaged up lower-quality US subprime mortgages.

No economies of scale

Aside from customers, the universal banking model has not been kind to shareholders either. The UK banks have underperformed the FTSE All Share index since 2002. Yes, even before the financial crisis banks were unloved by fund managers, who worried about overleveraged balance sheets, and how sustainable returns on equity would turn out to be. As it happened, the fund managers were right to be wary.

As the pull of size and consolidation worked on UK banks like gravity, this was justified in the name of efficiency. The trouble is that there is very little evidence that big banks are more efficient. Instead, they became in danger of collapsing under their own weight, like financial black holes. The cost/income ratios for large UK banks such as Barclays, HSBC, Lloyds and NatWest were all above the 60% level in the 2020 financial year – not much improvement from cost/income ratios seen ten, 20 or even 30 years ago. The smaller UK mortgage banks such as Northern Rock (before it failed) operated a more efficient model, with a cost/income ratio close to 30%.

My own experience of banking efficiency as an employee supports this. Over the years I have worked at both large banks (Credit Suisse, Societe Generale) and smaller brokers (none of which have survived to the present day.) Arriving at any small broker on my first day of work, my IT systems were set up, my Financial Services Authority registration had been transferred over and my new colleagues were pleased to see me. At large banks the first day tended to be shambolic. Most conversations with HR and IT started with the sentence: “Oh, hello! We didn’t know you were starting today”.

That’s because bringing all the banking activities under one roof created more complexity than any efficiency savings. Banks still needed to spend lots of money on technology systems. And any savings from streamlining the back office were lost, because they needed to employ an army of legal and compliance staff to manage conflicts of interest, for instance building “Chinese walls” to keep employees with inside information separate from market-facing roles and prevent the bank being fined by the regulator. The huge increases in computing processing power and decline in the cost of computer hardware hasn’t benefited shareholders in banks at all. By December 2014, Antony Jenkins, the then-chief executive of Barclays, was admitting that the universal banking business model was dead. Diversifing by business, customer and geography hadn’t worked.

Banks have many challenges

In recent years, low interest rates have made life even harder for banks. Most of the time, banks make a margin on their retail deposit funding, because their average interest costs are below central bank rates. But when base rates drop below 1%, margins shrink because the banks can’t charge customers enough for looking after their savings (notwithstanding the efforts of some European banks to levy negative rates on retail deposits). As interest rates rise, analysts expect banks to increase revenue. Still, while margins are set to improve, technology spending is likely to rise even faster and bad debts are hard to predict.

Setting aside the barrage of regulatory fines, the other reason that banks have struggled to generate the return on equity (ROE) that the market wants (10%) is that the regulator has demanded that they fund their balance sheets with less debt and more equity. Larger banks that are judged “systemically important” have to fund with even more equity, because of the serious consequences of failure. In very simple terms, that even bankers can understand, if the “R” of ROE stays the same but the denominator “E” increases, then it is a mathematical inevitability that ROE will fall.

A further problem is that banks tend to reward their loyal customers with worse deals than the new customers they are trying to tempt away from other banks. In the short term, this strategy works. Customers have better things to do than check they’re still getting a good deal every couple of months. But over time, the strategy is bad news for shareholders. It’s terrible for banks’ brands to use inertia from loyal customers to generate high returns. Thus the last few years have seen disruptive new entrants, such as Atom, Monzo, Starling and Funding Circle.

In theory, these financial technology (fintech) firms can offer more competitive services because they don’t have legacy IT system costs or a branch network. That said, given that the disrupters tend to be loss-making, it could just be that their services are being funded by deep-pocketed venture capitalists.

Last year the UK saw $11bn of investment into fintech. There were 713 deals, with Revolut, Monzo, and Starling in the top five amounts raised. Zopa, the peer-to-peer lender founded almost 20 years ago, still managed to raise $220m from SoftBank’s Vision Fund 2. The UK fintech sector seems particularly good at attracting capital, because that $11bn is more than double the next largest in Europe: Germany ($4.4bn), followed by France ($2.3bn) and Sweden ($1.7bn). Overall, $24.3bn was invested across the continent in 2021, with the UK representing nearly half (45%).

Most disrupters aren’t disrupting

That sounds impressive, yet the pandemic has not been the boon for fintech that it has been for tech firms, as Marc Rubinstein points on Net Interest, his financial sector blog. Monzo’s fund raise in May 2020 was at a 40% discount to its previous funding round. German digital bank N26, funded by Peter Thiel, pulled out of the UK after finding the competition too strong.

Meanwhile, branch-based challenger bank Metro Bank has fallen 95% since its initial public offering (IPO), while peer-to-peer lender Funding Circle is down 75% since its IPO at the end of 2018. These have not been anyone’s idea of a successful investment.The problem is that UK banks’ core business of taking customer deposits and lending out money is highly competitive. Thus the fintech winners are not the ones trying to re-invent universal banks. Revolut and Wise (formerly TransferWise) show that fintech isn’t just about technology, it’s also about finding the areas of greatest risk-adjusted return. They have focused on cross-border payments, attacking the huge difference between the currency rates available to large corporate clients in wholesale markets and the price that retail banking customers pay.

Ten years ago there was a complaint to the Office of Fair Trading by consumer groups because banks were charging 3% on foreign currency transactions. Some debit cards also added a further fee of £1.50 per transaction, while using a bank card to withdraw cash abroad could cost up to £4.50 a time. At the time a spokesman for the British Bankers’ Association (BBA) blamed the high fees on foreign payment systems, saying “transaction costs abroad are driven by the costs of overseas payment systems, often in countries where free banking does not exist”.

Of course, this was nonsense. And hence both Revolut and Wise were founded by eastern Europeans who were appalled at the price gouging from banks when they wanted to send money home.

Wise and Revolut: the two winners

Wise was originally a way to send money to bank accounts overseas (see below). It unbundled a specific financial product and offered better value than the competition, with no cross-subsidisation.

Revolut began as a pre-paid card and an app for spending money abroad. It planned to levy a small fee every time a customer used the card, but realised that there wasn’t enough money in this to support the cost and started charging subscriptions. It is remarkable that an app can charge customers up to £13 a month, while UK retail banks with higher-cost branches and legacy systems struggle to convince customers to pay anything. Rather than lower costs, Revolut is able to make money by charging customers to access services they value, such as crypto trading, which has done well over the pandemic. That said, Revolut’s subscriptions made it £222m of revenue in 2020, but direct costs and administration expenses meant that the business made a loss of £207m the same year.

Wise and Revolut attracted millions of customers, despite not having a banking licence. They had an e-money payments institution licence, which means that they weren’t able to lend out money to borrowers and take credit risk. Instead, they have to keep customer funds in cash or other low-risk alternatives. (Revolut was granted an EU banking licence last year.)

So the great irony of fintech is that technology has not meant bigger, more efficient banks. Nor has it allowed new entrants using technology to disrupt saving and lending. The real success story is built on the fact that wholesale customers who deal in large size receive a better price than individuals. That’s true in any industry and financial services is no different. That was the original reason for brokers (who bought and sold on behalf of retail clients) and jobbers (who made a market and dealt wholesale). Wise and Revolut have used technology to reduce the size of the retail versus wholesale price difference. That outcome is light years away from anything foreseen at Big Bang.

Is Wise worth 90 times earnings?

Wise (LSE: WISE), which has a March year end, put out a third-quarter trading update in mid-January. It’s enjoying strong growth, transferring over £20bn in the three months to December, up by 38% from a year ago. So far this strong transaction growth has meant reducing costs, the benefit of which it shares with customers by driving down fees, while generating cash for reinvestment.

The firm says that over the last year it dropped prices across 50 currencies and fees are now 0.60% of transaction value on average, nine basis points lower than a year ago. It was profitable in the first half of the year, to September 2021, making £19m, and analysts are forecasting profits to reach £150m in the 2024 financial year, according to data from SharePad.

Analysts covering Wise are forecasting around 24% revenue growth in 2023 and 2024, and the total addressable market for cross-border transactions is huge. There were around £2trn of global cross-border payments made by individual consumers in 2020. Around two-thirds of that is done by banks – Wise estimates that it has a market share of around 2.5%. That £2trn pool is also growing.

Like many fast-growing tech stocks, the shares look expensive. The forecast price/earnings (p/e) ratio is 90 and price/sales (p/s) ratio is 15, according to SharePad.

This approach to growing fast and sharing efficiencies with users is similar to Amazon’s. Even after 25 years of growth, the “Everything Store” now has revenue of half a trillion dollars, but shows no signs of going ex-growth. It trades on a forecast p/e of 70. In his 2005 letter to shareholders, Jeff Bezos described Amazon’s strategy in this way: “Our judgment is that relentlessly returning efficiency improvements and scale economies to customers in the form of lower prices creates a virtuous cycle that leads over the long-term to a much larger dollar amount of free cash flow, and thereby to a much more valuable Amazon”.

Wise, like Amazon, intends to expand its product offering. It recently launched a service called “Assets” for UK customers. They can now transfer balances to an index fund, while still being able to spend or transfer money overseas as though the balance were still held in cash.

There are risks to Wise. One concern is the co-founder, Taavet Hinrikus, selling 11 million shares last year, and entering a loan agreement with Goldman Sachs where up to 49.6 million shares would be pledged as security. There’s also a dual share structure common to many tech stocks. The founders hold B shares that have nine times more votes than the A shares. That lets them keep control even if they decide to cash out their A shares.

I think the bull case is relatively easy to make, but the high valuation multiples mean that if the company disappoints, then it’s likely to be punished severely. For every Amazon-style investment, there are plenty of Groupons and Pelotons that don’t receive much attention – once hyped stocks that failed to deliver.

Hardly a week seems to go by without a fresh activist assault on a major British company. Last week, it was the turn of the energy giant SSE. Elliott Management, one of the most aggressive activist investors, attacked the company for not spinning off its renewables business, preferring instead to keep itself intact and beefing up its plans for switching out of fossil fuels.

Elliott, of course, is best known in the UK market for its long-running campaign against the pharmaceuticals giant GSK, which has had to scramble to defend chief executive Emma Walmsley in response to the pressure. Meanwhile, Shell is under attack from the hedge fund manager Daniel Loeb, who is campaigning for it to split out its renewables unit from fossil fuels. And Barclays has managed to see off the campaign for change led by the activist Edward Bramson for now, but either he or someone else may be back soon, pressuring either the bank or another major company. The list goes on and on.

The wrong kind of activism

Of course, there is nothing wrong with shareholders demanding changes at major companies. Management teams can often become very inward-looking and complacent. They stick with strategies long after they have completely run out of steam, ignore new ideas, persist with pet projects even when they have failed, and concentrate more on rewarding senior management than the shareholders. Boards of independent directors are meant to stop that from happening, but are drawn from a small, self-perpetuating clique, with little incentive to provide any proper oversight.

And yet there are two big problems with the way change is forced on companies right now. The activists’ campaigns are starting to look every bit as tired as the companies they are trying to reform. Each time one is launched the demands are tediously familiar. A demerger? Check. More aggressive share buy-backs? Check. Sweating the balance sheet to release more cash? Check. A special dividend for shareholders? Check. Throw in something about changing the board or updating the marketing and that is about it. In reality, it is very flimsy and very repetitive, as if they are working from a script. You would get a more individual conversation from someone at a call centre.

What’s more, most of the campaigns are run by hedge-fund managers, investing borrowed money and looking for a quick profit. Their demands typically involve some financial engineering designed to generate a 20% to 30% boost to the share price over a few months and not much else. They are every bit as short-termist as the management teams they are trying to shake up and sometimes even more so.

Bring in the private investors

What activist investment needs is more involvement from private shareholders. There are some early signs of that happening. For example, the London-based investment platform Tulipshare is mobilising small shareholders to lobby for changes at big companies. It has already used votes to try and force Apple to make it easier for iPhones to be repaired (now that really is a good idea, as anyone who has paid for a new screen will know). It is now campaigning for Coca-Cola to use less plastic (another good idea, come to think of it, since we all know it tastes better out of a glass bottle anyway). This week, the company raised an extra €9.5m in funding to fund further growth.

This kind of platform might work or it might not, but there are big advantages to smaller, private shareholders pressing for changes at a company instead of a handful of giant hedge funds. They are a lot more committed to the long term. Sure, there are some day traders who just want to flip in and out of an equity in the space of a few days. But most private investors would prefer to buy shares in well-run companies and forget about them for a few years, confident that they will earn a decent return. And that means they are more likely to press for real changes in a business, rather than short-term, financially-driven fixes.

“A wave of fear over Chinese economic growth swept through global markets on Monday,” say Narayanan Somasundaram and Jack Stone Truitt on Nikkei Asia. Markets dropped in Asia, Europe and the US, where the Dow Jones Industrial Average at one point fell 972 points (almost 3%) before paring losses to 1.8% before the close. Behind the bout of jitters lay the fate of Evergrande, China’s most indebted property developer, which is teetering on the brink of default.

An Evergrande bankruptcy would “amount to a financial tsunami”, says Caixin. The firm has ¥2trn (£227bn) in known liabilities (about 2% of China’s GDP), plus unknown amounts of off-book ones. Some analysts say it could be “China’s Lehman Brothers”, referring to the 2008 collapse of the US investment bank that helped trigger the global financial crisis.

Risks are manageable

That’s an exaggeration, say analysts at Barclays. Evergrande is big and there will be consequences for China’s real-estate sector. “But a true ‘Lehman moment’ is a crisis of a very different magnitude.” It would entail a “lenders strike” across the financial system, a “sharp increase in credit distress” outside real estate and banks not being willing to lend to each other in the interbank market.

Evergrande won’t cause that. First, its financial-system liabilities are much smaller than its headline liabilities (more than half the total is what it owes to suppliers) – it has around ¥227bn in bank loans and about ¥158bn in offshore and onshore bonds. Second, China has “navigated successfully through a number of defaults and restructurings” lately, including the financial conglomerate Huarong, which had about ¥1.4trn in liabilities. There’s no reason to expect policymakers to mess up this time. Third, Evergrande – and other Chinese property firms – aren’t at the mercy of wholesale funding markets, as Lehman was. “In an extreme scenario where capital markets are shut to all Chinese property firms … which is not occurring … regulators could direct banks to lend to such firms, keeping then afloat.”

Unpredictable consequences

The crisis is not a Lehman moment, concurs Bill Bishop in his Sinocism newsletter. “But it is ugly and will get uglier.” It’s rash to assume policymakers “have a full understanding of all the Evergrande liabilities and interconnections with other firms” Some form of bailout will happen, but “the lack of guidance from regulators seems to be spooking investors”.

This “is far from being a well-managed process”, agrees The Economist – hence bonds from other developers such as R&F, Fantasia and Sinic have slumped over fears they may be next. The underlying issue is that Xi Jinping, China’s president, is cracking down on excess debt in real estate as “one of several campaigns [he] is using to remould the country”. So the contagion risks aren’t just about markets. Real estate accounts for 20%-25% of GDP, thus “an extended campaign against developer debt could significantly lower China’s growth prospects... and lead to greater economic and financial turmoil down the road”.

Last year HSBC took “billions of dollars” in loan losses, say Stephen Morris and Tabby Kinder in the Financial Times. Now it has announced an “almost fivefold rise in second-quarter earnings as the global economic outlook brightened”. Pre-tax profits “surged” from $1.1bn last year to $5.1bn in 2021, while the group “cancelled a further $300m of credit provisions”.

HSBC’s decision to reinstate its dividend is “another good sign” for shareholders, says Jennifer Hughes on Breakingviews. However, the fact that it is handing back “a mere seven cents a share for now”, suggests that HSBC’s management think that things are “only slowly moving in the right direction”. The payout, worth far less than half the group’s earnings, is pretty “meh” when set against UK rivals Barclays and NatWest. And while HSBC is saying that it will now “consider” buybacks, shareholders “shouldn’t hold their breath”. Don’t expect any major share-price rises either, says Emma Powell in The Times. Part of the problemis HSBC’s focus on Asia. In theory, it implies “arguably the greatest growth potential of any of the big five banks listed on the LSE”, since the region benefits from “an ascendant middle class and rising demand for wealth-management services”.

But the share price remains depressed by “geopolitical concerns”, especially the “fragile relations” between the West and China and Hong Kong, which account for half of its profits. HSBC is still feeling “intense heat” over its support of the national-security law that China imposed on Hong Kong.

Even hermits have heard of the collapses of Australia’s Greensill Capital, named after its founder Lex Greensill; America’s Archegos Capital (named from the Greek word for “leader” by its founder, Bill Hwang); and Germany’s Wirecard AG – a tiny casualty in the 2000 dotcom crash, then recapitalised in a reverse takeover by its CEO, Markus Braun.

Each of these men was a middle-management unknown claiming to have reinvented arcane areas of finance using new technology – which no-one questioned – to create eye-watering profits. Each was a consummate networker whose smooth sales patter attracted influential names from politics and business, creating a snowball effect. And each was leveraged to the hilt.

What intrigues me most is why some of the largest and theoretically most savvy banks in the world lined up to shovel ever more money into gaping black holes. This incompetence will do little to change the perception following the 2008 crash that banks and finance companies are unreformed gamblers. Yet despite these losses and rapid change throughout the sector, the investment case for banks is compelling.

Still too big to fail

After the 2008 meltdown in the global financial system the mantra was that no bank should ever again be “too big to fail”. In reality the big boys are still gobbling up the weak. A maximum of five banks dominate in every country. America is about to witness a frenzy of banking takeovers. Small challenger banks, sponsored by governments, were meant to shake up the market by taking on the established players. The UK is a leader in this regard, as well as in “fintech” – tech-driven financial services.

But these developments haven’t dislodged the dominant banks. This is a sector predisposed towards producing big beasts. In finance, size brings advantages, spreading costs and providing economies of scale in technology and compliance. The largest challenger is Virgin Money, an agglomeration of unloved banks whose assets are worth about 7% of those held by the UK’s No.2, Barclays. The assets of all challengers and fintechs amount to less than the Nationwide Building Society’s; it is the seventh-largest traditional bank.

Attracting customers with special offers is easy; making them profitable is not. Nor are the challengers cleaner than the behemoths. Metro Bank in 2018 was found to have mis-classified loans, thus breaching capital adequacy rules while the then-chairman had paid his wife’s firm at least £20m for design work on hideous colour schemes. N26, Germany’s largest online challenger, has been told by the German financial regulator, BaFin, to improve its IT systems to prevent money laundering.

Lex, Bill and Marcus highlight yet again the incompetence of the regulators and ineffectiveness of new regulations. So large and cumbersome are these (more rules were created between 2009 and 2015 than in the previous 200 years) that, perversely, it makes them easier to avoid. In the case of Wirecard, BaFin, the government and the Bundesbank threatened to prosecute the journalists who lifted the lid on its fantasy accounts.

Banks will always be unstable because of the genuine genius of fractional banking. Early bankers realised that depositors were unlikely to withdraw their money simultaneously, so only a fraction of deposits are backed by cash. The excess deposits are then used to lend, invest or speculate. Fractional banking is always at risk from a sudden loss of confidence, worsened by stupid loans or borrowing from the wholesale markets (in other words, other financial institutions), which can suddenly cut off credit. This helped bring down our introductory trio and, earlier, Northern Rock. Yet banking is changing at breakneck speed. The consequent uncertainty is one reason why many banks are dirt cheap.

Fintech is finding its feet

New tech-savvy competitors are one threat. Even at the turn of the century banks were wedded to the one-stop shop model, cross-selling a range of financial products. It never worked because the products were often poor and overpriced. New tech disrupters, sometimes selling a single product, have stolen much bread-and-butter business. Wise, for instance, founded in London in 2011, is an international money-transfer company. Its first-year turnover was £8m. Last year sales reached £4bn – per month.

Similar firms are murdering the high-fee, low-service foreign-exchange business of mainstream banks. Six-year-old Revolut is solely a tech-bank. It offers many financial services, is expanding overseas and already has an estimated 16 million customers. These new companies specialise in providing user-friendly and instant access via mobile phone or tablet, keen pricing and transparent fees. For anyone with any technical nous and anyone under 45, transferring money, or buying insurance or shares with lengthy paperwork at the branch of your local bank, is anathema.

The technology problem is also internal as most banks underinvested for decades. As a result, every takeover leads to a collapse in their computer systems. Having been bought by Spain’s Banco Sabadell in 2015, TSB’s future was destroyed in 2018 by a botched IT “migration” costing over £200m in reparations. Sabadell has forlornly sought a buyer, but has no chance of recouping its £1.7bn purchase price.

Yet the greatest threats to incumbent banks lie elsewhere. The core business of banks remains lending out their depositors’ money. The key metric in this respect is the “net interest margin”, or NIM, the difference between the interest rate paid on deposits and the rate charged for loans. With near-zero interest rates and fierce competition, NIMs are tight; witness the many sub-inflation mortgage offerings.

Worse, shadow banking has taken away much of banks’ core business. Providing finance for projects was once the exclusive preserve of banks. No longer. Non-bank finance and shadow banking is not dodgy geezers offering loans in cash, but rather pension funds, insurers and private-equity groups putting their spare money to better use. So my local solar farm, for example, was financed by pension funds and has been bought by an insurance company that needs a reliable income stream. Another major threat to banking is digital currencies. Cryptocurrencies’ underlying technology – blockchain, the digital ledger – is of potentially enormous value in terms of speed, security and traceability.

Central banks and governments have belatedly realised that they are potentially losing control of money and payments systems, not to crypto bandits, but to foreign giants and non-banks beyond their remit, such as Amazon or Google. Big Tech is seeking to develop blockchain technology; no wonder, then, that the major central banks are urgently looking into “central bank digital currencies”, or CBDCs (see page 16). These are hugely controversial, as potentially the blockchain allows governments to be aware of – or stop – your every financial transaction (hence China is trying to develop CBDCs as fast as possible), while in theory making the prime raison d’être for banks – taking deposits – more redundant than steam trains.

Poor sentiment has produced bargains

So why invest in banks? One reason is that they are cheap for no good financial reason save historic sentiment, trading well below book value, a good test of cheapness. Loan-to-deposit ratios are at prudent levels. After the shock of 2008, much higher reserve requirements have been imposed to act as buffers against any downturn; balance sheets have rarely been stronger. Scandals notwithstanding, risk controls have slowly improved: artificial intelligence has the potential to make them better still. With technology, banks are belatedly playing catch-up, hiring staff better trained in coding and computer skills. JPMorgan spends $11bn a year on technology. A fifth of its 225,000 staff are technologists. Others have realised they must follow. The advantage of the disrupters is ebbing.

Controversially perhaps, banks have had a huge windfall from the pandemic. Only the large incumbents could process government support. They kept economies ticking over. But at the same time the smarter banks realised their business models could and must change more quickly. Trends before the pandemic, such as home-working, will now race ahead. Branches will be closed at record rates, whatever the grumbles from politicians. Many are divesting whole business lines where profitability has been poor. The one-stop shop is truly dead.

For years banks have struggled to deliver on promises to reduce their cost-to-income ratios. Costs are dominated by staff and premises; fewer branches mean fewer staff and premises. Today the skylines of many major cities are dominated by trophy headquarters and financial skyscrapers such as NatWest Tower or Canary Wharf in London. Many, if not most, are redundant. The potential impact on costs and profits is spectacular.

Finally, there are five bonuses around the corner. Banks can be winners from the likely return of inflation: as bond yields rise so their NIMs should improve. Secondly, as the pandemic ends, demand for loans for housing, other durables and business is recovering sharply. Yet the real profit boost will come from (unusually) prudent loan-loss provisions. Many banks were over-providing for loan losses pre-pandemic. Provisions increased sharply, but as they are written back, profits will soar. Moreover, many banks have considerable surplus capital. The scope for large and rising dividends is the best of any sector. Finally, the advantages of incumbency are enormous.

What next for insurers?

By contrast, the outlook for the other half of finance – insurance – is less clear. This sector suffers from many of the same threats as banks, but has fewer options. Insurance is about pricing risk, so it is the most data-intensive industry on the planet. Insurers are giant tech firms. The problem is that many are very dozy giant tech firms. The property and casualty business of insurance companies accounts for about one-third of their global premiums (or income), but less than a third is comprehensively computerised.

A Deloitte survey of 32 UK insurance firms found a clear correlation between profitability and technology talent, and that the UK was lagging behind in attracting and retaining skilled staff. Only a quarter of employees possess digital or analytical skills, with a mere 12% of staff employed in these two roles. Yet over half of all staff in international tech giants have these skills, with a third in digital or analytical roles. Insurance brokers are even worse. A mere 6% of their staff are employed in digital or analytic jobs.

Change is coming. Globally, surveys show about a third of all insurance companies are looking to sell off less profitable/non-core businesses and to ramp up their technology expenditure and increase their merger and takeover activity, often to acquire such expertise. The spur for change is nimble new tech companies using big data, the better to price risk, policies and pay out faster.

In the UK “insuretechs”, such as FloodFlash, use algorithms to anticipate flooding and after the recent Yorkshire floods the firm was paying out within ten hours. Wrisk provides rapid and flexible car insurance. In America companies such as Hippo (home insurance), Lemonade (insurance for tenants) or Oscar (health) are eating the larger companies’ core businesses. As if this were not enough, insurance companies are compelled to hold large capital reserves to cover future payouts, much of which has to be held in the highest-rated bonds. These yield nothing. Cyberattacks, increasing climate and ecological risks and a tougher approach by many courts are all difficult headwinds.

But it’s not all gloom. Insurers are adept at raising premiums and shrugging off huge losses. They are also clever at selling you products you didn’t know you needed. Millions of travellers will buy “plague cover” now that it is less urgent to do so. Takeover activity will be rife and will bolster stocks. Capital buffers and reserves are high and the scope for chunky dividends is almost as good as at the banks. And some will adapt, ditch their arcane practices and make better use of data and tools they already own. The banking and insurance sectors are probably the world’s least popular, except perhaps for coal mining and, unlike many, offer excellent or reasonable value. Lex, Bill and Marcus loved their banking friends, who loved them back. I’m less passionate perhaps but am equally amorous for financial gain from stockmarket anomalies.

What to buy now

Although I have extolled the new technology upstarts, I do not advocate buying any. Most are losing money and I’m not smart enough to distinguish the few swans from the ugly ducklings. For a global spread the sole UK financials investment trust is the Polar Capital Global Financials Trust (LSE: PCFT). Well-diversified with a 2.6% yield (likely to rise fast) and trading on a small premium to net asset value (NAV), it looks a sensible bet.

A more interesting, but riskier trust is the £1.1bn, three year-old Chrysalis Investments (LSE: CHRY), which has a very heavy weighting towards unlisted fintech-related companies before they come to market. Performance has been good, yet it trades on a 3% discount to NAV. The negative, in my view, is the egregious performance fee. There is a large range of insurance equity funds. The best-performing is also run by Polar Capital, the Polar Capital Global Insurance Fund F class. Since 2010 the NAV has handsomely exceeded its benchmark and index.

Because I believe the value and gains in financials are clear and probable respectively and many of the best opportunities lie in the underperforming and beaten-up UK market, I prefer individual stocks that are large household names. The big six UK banks have put aside £96bn for loan losses, twice their already high pre-pandemic levels, and hold £32bn of excess capital.

Their credit models will all but force them to release these by way of dividends and/or buybacks. Firstly, consider Barclays Bank (LSE: BARC). This is despite its paranoid CEO who was fined £642,000 by the Financial Conduct Authority, the City regulator, in 2018 for trying to hunt down a whistleblower. The most recent quarterly results beat analysts’ forecasts by a third and its Tier I ratio – or capital buffer – is a whopping 14.6% of risk-weighted assets. Barclays has proved European banks can make money from global investment banking and plain vanilla, basic banking.

Lloyds Banking Group (LSE: LLOY) is entirely plain vanilla with an even higher Tier I ratio of 16.1%. It, too, reported sharply higher first-quarter profits of £1,283m, an increase of 60%. I have been buying both at prices above and below today’s levels. Like Lloyds, NatWest (LSE: NWG) was also bailed out by the government, whose 60% stake will act as a drag as it is drip-fed into the market, so the stock requires more patience. It, too, is storming ahead, with first-quarter profits of £964m compared with the consensus expectation of £536m. Of the large UK banks, it appears to be making the fastest progress in upgrading technology and building cybersecurity.

Overseas there are many other opportunities, but given great value at home, why bother? But I do have a large holding in Bank of Ireland (LSE: BIRG). It was mulched in the 2008 meltdown, but is now well capitalised. It and Allied Irish Banks have the Irish market to themselves these days as rivals have disappeared, so they enjoy cartel-like pricing power. I have not given multiples or yields for any of the above because the pandemic has made the former temporarily meaningless. The latter are currently subject to government controls. But around ten times and 4.5% plus are prudent guesses for 2022. All trade well below book value.

Edward Bramson’s Sherborne Investors has finally called time on its campaign against Barclays. In 2018, the activist investor built up a 6% stake in the bank, and used that shareholding to campaign for the removal of the chief executive, and a shake-up of its management and strategy. Not many other investors got on board, however. Last week, he finally called it a day. But if Bramson wants to move on to another company, he won’t be short of targets. Quite a few other chief executives should be feeling nervous.

A pharma giant stumbles

Activist investors have a bad reputation. They are portrayed as greedy asset-strippers, intent on destroying fine old businesses that their staff and customers love. But they play a crucial role in a free-market system. Professional managers often turn into a self-selecting oligarchy who pay themselves vast sums of money for doing very little. It is hard for shareholders to exert any real discipline over them, beyond the occasional protest vote, and a full takeover bid is usually ruinously expensive, loading up a business with debt that can often bankrupt it. The activists simply build up a significant stake at their own expense and then put pressure on the management to shape-up. Without them, firms risk drifting on forever until they finally disappear.

So where should Bramson look for fresh targets? GlaxoSmithKline (GSK) is already, rightly, on the radar of Bramson’s fellow activist investor Elliott Management. While AstraZeneca and Pfizer have been making headlines in the Covid-19 crisis, GSK has been invisible: its one vaccine candidate, developed in partnership with Sanofi, is nowhere close to the market. Under Emma Walmsley, the drugs firm has been consistently disappointing, and her plan to split its consumer and pharmaceuticals division isn’t exciting anyone. The shares have drifted for years. Elliott is already pressing for changes, but two or three shareholders joining forces might finally push Walmsley into leaving the company.

With retailing still in crisis, it is surely time for Marks & Spencer (M&S) to make up its mind whether it wants to be a clothes or a food company. Its strange hybrid looks well past its sell-by date, and it has long since lost its grip on the fashion market. It should split itself up and sell itself off: if Boohoo are willing to buy brands such as Wallis and Dorothy Perkins to appeal to a different demographic online, they might well want M&S as well; the food business might fit with Amazon, or be fully taken over by its existing partner, Ocado. Both would be a better option than yet another relaunch no one has much faith in.

Unilever is another candidate. There is nothing wrong with its commitment to environmental and social issues, especially at a time when consumers want brands to have a conscience. Yet the shares are no higher now than they were four years ago. The company needs to dial down the woke agenda and focus on growth.

Managing decline

Lloyds has made a full recovery from the catastrophe that followed its takeover of HBOS in the wake of the financial crash. But while the last decade was all about steadying the ship and rescuing the balance sheet, under its new CEO Charlie Nunn it needs to start expanding again.

The two great oil giants, BP and Shell, that dominate the London market talk a lot about their plans to convert to green energy. But there might well be a different path for them. The tobacco conglomerate BAT has accepted that smoking is in long-term decline, but in the meantime it has been fantastically profitable for shareholders. An activist shareholder could persuade both companies it was better to be cash-generating machines in an industry on the way out than one that is always struggling to re-invent itself against newer rivals.

Finally, BT has recently overhauled its management and been rewarded with a recovery in its burnt out share price. But even so, the BT Sport fiasco, which saw the company spend billions on an eccentric foray into football broadcasting, is still a huge headache. It needs a complete overhaul.

As part of his pledge to turn “generation rent into generation buy”, chancellor Rishi Sunak announced a 95% mortgage guarantee in the March budget, due to launch in April. The scheme, designed to encourage lenders to start offering 95% mortgages again after almost every single one was withdrawn due to the pandemic, will see the government partially compensate lenders if homeowners fail to pay their mortgage.

According to Which?, using data from MoneyFacts, the number of 95% mortgages available to buyers fell from 391 at the start of 2020 to just three by the end as lenders sought to protect themselves as the pandemic saw many people’s incomes fall.

The new scheme is available on new-build and existing properties up to £600,000 and is open to first-time buyers and home movers alike, but second homes and buy-to-let properties are not allowed. are eligible. Yorkshire Building Society beat the government to it, announcing the relaunch of 95% mortgages through their mortgage arm, Accord Mortgages, in mid March. Major banks including Barclays, HSBC, Lloyds, NatWest and Santander have all committed to launching deals in April under the scheme, too.

Yorkshire Building Society’s loan comes with an interest rate of 3.99% and a £995 fee. It’s not available for flats or new-build houses, or for people who are currently furloughed. Chances are that, as the government’s scheme launches, more lenders will be releasing different loans, so it’s worth looking into which lender offers the rates that suit you the most. It’s also worth noting that the better rates will be available to those with more substantial deposits. But, if 95% mortgages are still of interest to you, or you’re just curious, here’s a look at what’s on offer now.

According to broker Habito, who launched 40 year fixed rate mortgages earlier this month, if you were buying a property priced at £100,000 with a mortgage of £95,000, (so a loan to value (LTV) of 95%) repaying with a fixed rate over 25 years you’d pay:

• £472 a month with an initial rate of 3.44% with The Cambridge Building Society
• £490 a month with an initial rate of 3.79% with Nationwide
• £500 a month with an initial rate of 3.99% with Furness Building Society
• £524 a month with an initial rate of 4.44% with the Teachers Building Society
• £559 a month with an initial rate of 5.08% with Aldermore

The same search on comparethemarket also brings up the Loughborough Building Society’s mortgage, with a monthly payment of £493.61 and an initial rate of 3.85%.

In comparison, with a 20% deposit, monthly repayments for Nationwide – which offers the best rate according to Habito – would cost you £358, with an initial rate of 2.49%.

There are also far more lenders to choose from with higher deposits, but as we said more lenders should be coming out with 95% mortgages as the government scheme kicks in this month, and no doubt there will be some competition among them as to who can offer the lower rates.

The lowest rate is currently 3.44% with the Cambridge Building Society, but it should be pointed out that the cheapest 95% mortgage at the start of March 2020 was priced at 2.9%. So if a 95% mortgage is on the cards, it might be worth waiting for a little bit longer for lenders to regain confidence and lower their rates.

The Bank of England is working out the details of a deal that will allow the retail banks to start giving money to their shareholders again. So long as net lending continues to grow, and capital ratios remain robust, they will be allowed to restore their dividends. That is a significant reversal. At the height of the Covid-19 crisis in the spring, the Prudential Regulation Authority wrote to the main banks asking them to cancel any remaining payouts for 2019 and for the whole of 2020. In recent weeks both Barclays boss Jes Staley and Santander’s Ana Botin have called for an end to the ban in public, and now it looks as if, subject to a few conditions, that will be allowed. HSBC said this week that it was likely to start paying a dividend again soon.

A monstrous imposition

Cancelling the dividends took a heavy toll on the share prices of all the main banks this year. From 130p before the crisis, Barclays slumped below 100p before recovering slightly. Lloyds went from 63p at the start of the year to below 25p. NatWest (formerly RBS) dropped from 240p to below 100p, and HSBC from close on 600p in January to below 300p. That is a terrible performance. But then what could be expected? If a company is not allowed to pay out dividends it is hard to see any point in owning the shares – and we can hardly blame investors for selling out. It would help both the banks and the wider economy to restore those dividends as quickly as possible. Here’s why.

First, it is not the job of the Bank of England or its supervisory arm to control payouts to shareholders. The ban should never have been imposed in the first place. Sure, if the banks had been behaving recklessly and heading towards collapse, then it would have been reasonable to stop that. But that wasn’t happening. The main banks were chugging along fine, and making profits, much as usual. In its third-quarter results published this week, HSBC made more than £3bn in profits. If it wants to pay some of that out to its shareholders, there isn’t any reason why it shouldn’t. Likewise, Barclays made profits of more than £600m in the third quarter. Why shouldn’t shareholders get a slice? The ban on dividends was in truth more a PR stunt designed to pander to public opinion than it was anything to do with “prudential regulation”. It is not up to regulators to decide how a business is run or what it chooses to do with the money it makes. That is up to its owners and managers.

It’s not just the banks that are hurting

The second point is that the policy weakened all the retail banks. A bank with a plunging share price and unhappy, disgruntled shareholders looking for an exit, is not going to be a very happy place. The CEO will be under pressure, confidence will be damaged and staff will be worried about their jobs. A bank in those circumstances is not going to lend more, or launch new products, or offer help to customers in trouble. To get out of a recession you need healthy, buoyant banks – and you don’t create those by wrecking their share prices.

Finally, the dividend ban weakened the whole stockmarket as well. Retail banking is a major component of the FTSE 100 index. The high street banks are among its biggest companies. Hammer their share prices with dividend controls and it is not very surprising that the entire index quickly found itself under pressure. UK equities have performed far worse than most major rivals, and that is a big part of the explanation. Just as significantly, the banks represent a major part of the total dividends paid out by the FTSE 100. Of the ten FTSE companies paying out the biggest total dividends in 2019, two were retail banks: HSBC, with a total payout of more than £8bn; and Lloyds, with a payout of more than £2bn. Strip those out of the total, and the dividend yield on the whole index takes a significant hit. Investors then have less money to spend, and less to re-invest, and that hurts the whole economy. The sooner dividends are restored, preferably without any conditions attached, the better for everyone.

The weekend papers were full of worry about negative interest rates coming to the UK. This isn’t a given (the implications for the banking sector aren’t good). But it is more likely than it was a few months ago, given that the Bank of England is clearly looking not just at the academic case for them but also the practicalities of introducing them (computer systems are only designed to deal with positive rates).

You can hear what John and I think about all this on the latest MoneyWeek Podcast (clue: not much) and in John’s Money Morning on the subject (if you don’t get our brilliant daily newsletter, sign up here).

Most commentators, one column in the Observer aside, seem to share our concern about the long term effects of turning the concept of money upside down. Former Barclays chairman John McFarlane summed it up in quotes in the Telegraph: negative rates, he said, risk causing a “massive dislocation” in markets. An editorial in the Times notes that it would “have damaging side effects that would take a long time to heal.” That might be fine, if there was any real evidence that they would achieve the main aim – stimulating the economy. There isn’t. “Whether they achieve the desired effect of stimulating demand and inflation, is debatable.”

Still, in our world of something-must-be-done-ism, just because there is no evidence a controversial and disruptive policy works does not mean it won’t be introduced anyway. So what will negative rates really mean for you in the immediate?

The key thing here is that the UK’s banks will be being charged for having cash deposited at the central bank. They will be paying negative interest rates – and they’ll need to finance that by charging someone else to cover it. In theory, that someone else could be you – you could end up paying for the privilege of having cash in the bank. In reality, that is not particularly likely; it hasn’t happened in other places where negative interest rates have been introduced. Instead, negative rates are likely to be charged on very large balances only (mostly corporate and perhaps the odd very large retail account).

The thing the rest of us have to look out for is the introduction of negative rates as the trigger for the imposition of banking fees in the UK. The UK’s banks have been skirting around this issue for years. The fact that no obvious fees are charged on retail banking accounts does not of course mean that these accounts are actually free (the difference is made up with overdraft charges and the paying of no interest on current accounts). They do however – from the customer’s point of view – feel free. So what will change?

The CEO of Virgin Money offered some suggestions in the Daily Mail this week. He expects banks to “make slow and incremental” changes over the next few years to test exactly what we are prepared to pay for. It could mean upping rates on credit cards, mortgages and foreign exchange (I’m afraid no one is going to get paid for having a mortgage). Or it could mean paying for obvious services – fees for replacement debit cards, for example (something Monzo and Starling are already experimenting with). Eventually, it should mean that most accounts are fee paying. Negative interest rates are not the catalyst I would have chosen for this. But fee paying accounts are not necessarily a bad thing – after all, it does cost something to provide them.

The UK retail banking system has long been awful – shot through with hideously untransparent charges designed to catch the unwary, admin phobic and overdrawn out. The result has been an oddly unprogressive system whereby the poor pay, the well off often do not, and scandals appear with worrying regularity (PPI etc). It makes no sense. The introduction of low flat fees across the system might not make the banks perfect (decades of devotion to low-level dirty dealings will be hard to shake off) but they might at least change the dynamic that has been such a big contributor to their failures over the years.

Gerard Lee Bevan was born in London in 1869 and, after studying at Eton and Cambridge, took a job as a clerk at Barclay, Bevan, Tritton, Ransom & Bouverie (which later become Barclays bank). He was later a junior partner with stockbroker Ellis & Co in 1894. By 1912, he was effectively running the brokerage as its senior partner. In 1916 he bought a large stake in the City Equitable Fire Insurance Company from the notorious company promoter Clarence Hatry, becoming its chairman. He was also appointed director of several companies.

What was the scam?

Bevan’s appointment as chairman gave him control of the money that City Equitable received in premiums. Instead of putting it in low-risk assets, such as gilts (government bonds), which can easily be liquidated in order to pay out claims, he lent large sums to Ellis & Co, which was investing in various dubious schemes, including several companies floated by Hatry. City Equitable also directly invested in the same companies. In order to conceal these dubious loans and investments, Bevan manipulated the accounts and engaged in outright fraud to give the false impression that most of City Equitable’s money was still invested in gilts.

What happened next?

In the stockmarket boom following World War I, it briefly seemed like Bevan’s strategy would pay off. However, when the market started to collapse in 1920, many of the shares that Ellis had invested in plunged in value and it became obvious that Ellis couldn’t repay its loans. Many of the investments were also illiquid. As a result, City Equitable was unable to meet its insurance claims and was forced to declare bankruptcy in early 1921. After running away to the continent, Bevan was arrested, extradited, convicted of fraud and sentenced to jail for seven years, later dying in poverty in Cuba.

Lessons for investors

The £910,000 in loans to Ellis & Co (£40.2m in today’s money), combined with around £400,000 in dubious investments (£17.8m), resulted in the bankruptcy of both institutions, wiping out shareholders and Bevan’s partners alike. Bevan failed to appreciate the dangers of taking on too much leverage and the need for an appropriate degree of liquidity. Modern insurance companies do invest in shares (and even private equity), but they still have around three-quarters of their assets on average in bonds and cash.

Tesco Bank has left the mortgage market by selling its £3.7bn loan book, says The Daily Telegraph. This is in line with a strategy to "slim down the number of services and products it offers to reduce costs". The 23,000 customers will be moved to Halifax, a subsidiary of Lloyds.

While supermarket banking services "were once seen as a credible threat to the dominance of major high-street banks", tighter regulation in the mortgage market and a series of digital-banking apps geared towards winning over younger customers have hampered supermarkets' financial divisions.

The deal is the latest sign of the "convulsions gripping the UK's mortgage market", says Ben Martin in The Times. These have been caused by post-crisis regulations forcing banks to separate legally their investment banking arms from their high-street businesses.

As a result, the capital that lenders with a global presence would previously have been "free to put to work across their businesses" is now "locked in their domestic divisions". This in turn has encouraged large banks such as HSBC and Barclays to put the money into mortgages, creating "intense competition" that has hit the margins of firms such as Tesco Bank.

Margins in mortgage lending are so low that although the loans were bought at a premium of 2.5%, Lloyds claims that they "would still produce better returns than issuing new loans in current market conditions", says Nicholas Megaw in the Financial Times. It is hardly surprising, then, that Lloyds was not the only bank to bid for them.

British banks have been in the news for all the wrong reasons. We have seen queues outside Metro Bank, and it recently emerged that the Bank of England tried to prevent the prosecution of executives at Barclays for not disclosing the funding the bank received from Qatar during the financial crisis.

Stock returns have also been disappointing, with HSBC, Barclays, RBS, Lloyds and Standard Chartered all lagging the stockmarket over the last decade. However, look beyond the headlines and you will see that the major listed British banks have been grappling successfully with the legacy of the financial crisis, putting their houses in order in advance of any economic downturn, fending off competition from challenger banks, and getting down to the important task of growing revenues and profits.

Recovering from the financial crisis

Concerns that British banks haven't properly dealt with the legacy of the financial meltdown of 2007-2008 are clearly having an impact on the sector. Even though the crisis was over a decade ago, "it has taken a long time for the public to forgive the banks for what took place in 2007-2008", says David Miller of Quilter Cheviot Investment. Recurrent negative publicity over various cases of misconduct, notably the scandals over the fixing of Libor (a key interbank lending rate) and the mis-selling of payment protection insurance (PPI), have hardly helped.

Still, the good news, according to Miller, is that "there's a big difference between how British banks are perceived by the public and how they are regarded by their peers and compared with institutions in Europe and America, British banks have a good reputation". For example, regulators have forced them to increase the capital set aside to cover losses on loans. The buffer between assets and loans is far higher than the rules stipulate.

The average Tier 1 capital ratio (a key gauge of financial strength measuring equity capital as a proportion of overall assets) has more than doubled since the crisis to 18% today; the regulatory minimum is 10.5%. This means that banks could still survive even if the value of their assets fell by nearly one-fifth. More generally, there's been a "dramatic change" in the culture, which means that "they are now run in a much more prudent way".

Less legal hassle

The huge amount of money that British banks have paid out in fines and settlements may not have been good for their bottom line, but at least it means that the remaining legal risk has "greatly diminished", says Simon Gergel of Merchants Trust. Even though there is still a chance that there could be a surge of PPI claims in the run-up to the deadline (29 August), banks are "getting to the end of the process". While legal risk "will never completely go away", much tighter compliance means that "the potential losses from fines and lawsuits should be significantly lower than they were before".Of course, there are still "pockets of concern", such "as loosening credit standards" in unsecured store-cards and zero-percent balance transfer cards, says Philip Matthews, co-portfolio manager of the TB Wise Multi-Asset Income Fund. However, balance-sheet quality "appears to have been demonstrably improved".

Overall credit standards have also been tightened, "considerably reducing the riskiness of the assets held on banks' balance sheets". Far fewer high loan-to-value mortgages have been written compared with ten years ago. Banks have retained less of their leveraged loan exposure on their own balance sheets. The average unsecured loan exposure is lower and the banks have "pulled back from very high risk commercial real-estate lending".

Liquidity, meanwhile, has vastly improved. One of the key causes of the crisis was that banks moved away from relying primarily on customers' deposits to meet short-term obligations and instead started to lean on external money markets. Indeed, just before the crisis started they typically had only enough liquid assets, such as cash and short-term debt, to cover six weeks' worth of funding. This caused huge problems when the money markets suddenly dried up from the summer of 2007 onwards. By contrast, today they have "sufficient liquidity to cover two years of wholesale funding outflows", says Matthews.

Well prepared for a slowdown... if one comes

Investors also shouldn't worry too much about the possibility of a slowdown hitting the banking sector, reckons Gergel. The changes that the banks have been forced to make will ensure they are well prepared.

From the start of last year, the Bank of England has forced banks to follow new global accounting standards that require them to make provision for any potential losses in advance of any downturn rather than as it happens. This should pre-empt nasty surprises for investors and temper concern over systemic problems once a downturn arrives. While such provisions are currently having a negative impact on banks' balance sheets, it looks as though it will be "relatively minor".

Besides, there is no guarantee that the recession many people are expecting will actually take place. Even the potential impact of Brexit has been overstated. While the potential loss of the right to sell financial services across the EU will affect investment banks, it will have scant impact on retail banks. It's also important to remember that HSBC and Barclays are global banks with offices and operations around the world. So neither Brexit disruption nor a British downturn will particularly hurt their bottom line.

A Brexit boost?

What's more, if Brexit ends up being softer than expected then a great deal of pent-up demand will be released, boosting the economy and banks' balance sheets. "We've been living with Brexit for three years, so banks have had plenty of time to prepare for the worst," says Miller. Indeed, as part of the new, tightened regulatory regime, banks are regularly required to undergo "stress tests", which examine the effect a recession or a sudden drop in house prices has on their balance sheets.

All the major banks have repeatedly passed the tests, which suggests that a slowdown should be relatively easy for them to deal with. Rather than worrying about an economic slowdown that may never occur, investors should be more concerned by the fact that the Bank of England's enthusiasm for interest-rate rises seems to have dissipated. Higher interest rates are generally good for banks because they can earn more on their loans.

However, interest rates could rise unexpectedly quickly if inflation suddenly picks up a scenario that could take central banks by surprise, as we have often pointed out over the last few months.

Challengers' challenge overstated

British banks have also had to deal with new competitors. Since the crash, several "challenger banks" have emerged that aim to steal business from the incumbents. The government has encouraged the newcomers, such as Metro Bank, on the principle that increased competition will force existing banks to offer better service and more value for money. Two years ago RBS announced that it was setting up two funds, with a total value of £775m, to make it easier for small businesses to switch to challenger banks, as well as to encourage financial innovation more generally.

But while it would be wrong to write off the newcomers, the evidence suggests that the challenge they pose to the main players has been overstated. The recent turbulence at Metro Bank indicates that banking "is a matter of confidence and scale, so the challenges are more towards the newcomers than the big four", says Helal Miah, investment research analyst at The Share Centre.

Matthews believes they don't pose a significant challenge to the big players. After all, challenger banks "have disadvantages of their own... rapid levels of growth bring with them operational issues, as well as potential credit issues" if an unexpected economic downturn materialises.

Co-opting technology

A more significant long-term threat to the established institutions comes from financial technology (fintech) companies, which aim to use software or artificial intelligence to steal business from banks or make them obsolete. "We are in the middle of a wave of technological disruption," admits Georg Ludviksson, founder and chief executive of software company Meniga, which helps retail banks in the UK and Europe deal with the impact of technological change.Still, investors in the big institutions should be reassured by the fact that they are working extremely hard to stay on the cutting edge of technology, so that if there is a technological revolution, they are not being left behind. Indeed, not only are the main banks "fighting back by copying what the challengers are doing", but they are also "taking the initiative". Certainly, "all the banks realise that where technology is concerned they have to move faster and change", and as a result "most of them are making a lot of progress".

In fact, technological change in banking could end up helping big British banks more than it hurts them. Ludviksson points to the example of telecom firms such as Three, which have used the power of their brands to reinvent themselves as sales and marketing powerhouses, allowing them to outsource more capital-intensive, lower-margin tasks.

In that scenario, the big players could end up partnering with fintech firms to focus on those parts of banking that are more profitable. Even in the worst-case scenario, the traditional banks are hardly going to be supplanted in the near future. The fintech sector will only succeed by concentrating on niches "and then scaling up". It should avoid trying to "replicate everything that banks currently do".

Returning to profitability

Not only are the fears surrounding the British banking sector overblown, but there are also some compelling positive reasons for investing in it. Having absorbed nearly £100bn of costs, banks "are much better positioned to pay dividends or undertake share buybacks", says Matthews. Despite intense competition, traditional retail-banking activities remain highly profitable. One particularly lucrative area is mortgages, "with new business generating returns well above the cost of capital". This has been especially good news for Lloyds, which has used its strong focus on these bread-and-butter areas to generate "strong" returns on equity.

Things have been a little more complicated for the corporate and investment banking divisions of the major British banks. One of the big problems is that investment banking is a much more global industry, which means that British and European firms are competing "against large-scale US banks with less punitive regulatory regimes". The investment banking divisions of RBS and Barclays are "well off their return aspirations", leading to calls for Barclays to spin off its investment-banking arm. However, both banks are having some success in cutting costs, which should make it easier for them to boost margins and return on capital.

There are some other potential areas of growth that banks are starting to explore. A greater emphasis on investment advice and financial products that will help people plan for the future should pay dividends. "It's clear that people are being expected to take more responsibility for their own financial security, so if you can offer good advice then you are in a good position," says Miller. He also notes that banks such as HSBC, which derives most of its revenue from outside the UK, have an opportunity to expand this business in fast-growing areas of the world, such as Asia. Standard Chartered, another global player, has the same opportunity.

A sector for income seekers

One indication that the British banking sector is in much better shape than it was a few years ago, and has finally put the legacy of the great financial crisis behind it, is the increase in the level of profits. According to data from The Share Centre, last year the listed UK banks made a collective profit of £27.7bn, nearly triple the levels of £9.5bn five years ago. While this is still below the record level of £34.4bn in 2007, dividends have also increased sharply from £7.7bn to £11.6bn during the same period. The combination of falling share prices and rising profits has resulted in enticing dividend yields, especially compared with other industries.

The banking sector's best bets

HSBC (LSE: HSBA) is the largest UK bank by market capitalisation, and one of the largest banks in the world. The fact that it derives 85% of its revenues from outside Britain means that it should be insulated from any downturn in the UK economy and should also benefit from growth in emerging markets, especially in Asia. Despite this, it still trades at only 11.2 times 2020 earnings and yields an attractive 6%.

One British bank that should also benefit from growth in emerging markets, but is trading at a much bigger discount than HSBC, is Standard Chartered (LSE: STAN). Around 90% of Standard Chartered's revenues come from the Middle East, Africa and Asia, giving it exposure to some of the fastest-growing parts of the global economy. Its increasing profitability has enabled it to announce that it will spend £770m buying back shares. It trades at a discount of 47% to its book value and offers a dividend yield of 3%.

Barclays (LSE: BARC) is in the middle of a public row between activist shareholder Edward Bramson who wants either to shut down or divest the investment banking division and chief executive Jes Staley, who opposes such a move. Staley seems to have won the argument for the moment and has made some changes designed to give him more direct control of the division. More broadly, Simon Gergel of Merchants Investment Trust thinks that Staley is doing a good job of cutting costs and reducing the level of debt. Barclays trades on a 2020 price/earnings ratio of 6.5, with a dividend yield of 4.7%.

Lloyds (LSE: LLOY) was one of the banks, along with RBS, to receive a bailout from the government. It resulted in the Treasury taking a 43% stake in the company. However, two years ago the final tranche of government shares in the bank were sold, which means that is now completely free from government interference.

David Miller of Quilter Cheviot Investment believes it's made "good progress" in pushing through the structural changes needed for the institution to prosper, as shown by the 8% return on equity, a key gauge of profitability. It currently trades at a yield of 6%, and said that it now feels confident enough to start paying dividends quarterly rather than annually.

One challenger bank worth considering is CYBG (LSE: CYBG), which was formed when National Australia Bank decided to sell off Clydesdale Bank and Yorkshire Bank and float them as a separate company. Last year, CYBG bought Virgin Money (which owned Northern Rock), which should help increase its asset base and diversify its business away from mortgages.

While it unexpectedly failed to gain any money from the banking competition fund set up by RBS (it went to Metro Bank), management has promised to outline a detailed medium-term plan for growing the bank. CYBG trades at 7.3 times 2020 earnings and yields 3.7%.

If you're asked to picture a private bank, the things that spring to mind may be marble halls, subterranean vaults, hushed voices and perhaps Swiss accents. Today's private banks are, of course, more high-tech but the reasons for people using private banks don't seem to have changed much over the years. Some might use a private bank because they consider it to be prestigious; some might want the high-class service; while others like the perceived discretion.

As the word "private" implies, this type of bank has long held a reputation for privacy and secrecy. Although much of this has changed since the cultural shift towards a more transparent digital-banking system, some banks remain strictly private. As the PR person of one well-known bank told me, "the nature of the discreet relationships we have with our customers means we don't disclose information on levels of wealth or services", and therefore have "no wish to appear in your article". But is being a client with a private bank worth the high fees, or is it simply a tax on snobbery?

Banking for the affluent

The boundaries of private banking can be tricky to pinpoint. In the most traditional sense, private banks are independent banks that were originally family run and founded in the 17th or 18th century, such as Weatherbys or C. Hoare & Co. But today, many high-street banks such as Lloyds, HSBC and Barclays provide "premium banking" or "private banking" services.

What these private banks have in common, though, is the requirement for customers to be sitting on a certain amount of money. At Brown Shipley, private clients need to have "investable assets" which means money that is not tied up in your main residence of at least £500,000. At Arbuthnot Latham you need to have investable wealth in excess of £1m. Coutts' clients have to invest or bank about £1m, or earn half a million a year.

At the private-banking arms of high-street banks the threshold is lower. To qualify for HSBC Premier, you need to have savings or investments of at least £50,000 with HSBC in the UK; or an annual income of at least £100,000, in conjunction with a mortgage of at least £300,000, or another product taken out through its financial advisory service. At Lloyds, customers typically have at least £250,000 in savings, investments or personal pensions, or a sole annual income of at least £250,000.

If you're considering going to a private bank, it helps to know what level of service you can expect. Some private banks, such as Brown Shipley and Arbuthnot Latham, can offer a wide range of advisory services, including advice on tax-efficient investments, estate and inheritance-tax planning, pensions and investment management. "We use cash-flow forecasting to demonstrate to clients how they will be able to fund their future," says Liz Bottomley of Arbuthnot, when asked how it compares with high-street banks' private services. "We spend time with our clients to really get to know them and we continue to offer a high-touch personal service throughout our relationship. We are not bound by the constraints of a box-ticking approach."

Private banks: Four Seasons versus the Premier Inn

For some, the appeal of private banking lies in other perks. "Clients like being in the club'," says Stuart Newey, head of banking at Coutts, comparing the bank to a private members' club. The bank is beginning to host more events where clients can network with each other. Coutts was established in 1692 and has provided the royal family with banking services since Queen Anne's reign although as Newey points out, "We have a network of entrepreneurs not just royalty". Today Coutts is part of the RBS group. It provides banking, lending and investment services, including early-stage investment opportunities and wealth services relating to inheritance tax, philanthropy and the running of a family business. The bank also provides financial education for clients' children after all, "80% of wealth doesn't reach the third generation", says Lenka Setkova, head of Coutts Institute.

Unsurprisingly, Coutts' services are geared towards a certain type of customer. For example, "If a client buys a car in a showroom, it's not a problem", Newey explains in contrast to retail banks, which have more constraints when it comes to transactions involving large sums. Similarly, if clients travel, they don't need to ring up the bank to warn Coutts they're going abroad. Another advantage is that Coutts can easily cope with clients' complex financial histories. At a retail bank, Newey argues, "you get the same fraud profiling, and you're using the same phone lines as everyone else". At Coutts, an online algorithm recognises whether it's the client who is using online banking by how they use their keyboard, how they swipe and what language their phone is set to. As Newey puts it, describing the difference between the high street and traditional private banks, "The Premier Inn and the Four Seasons both provide a bed you can sleep in, but the latter knows what settings you like".

As the range of private-banking services increases, so do the fees. That said, charges vary widely across the industry, says Lee Goggin of FindaWealthManager.com. Some banks will charge 1.75% of assets under management, says Goggin. While it's hardly bargain-basement levels, it may well be significantly lower than you might be charged "by an independent financial adviser, who will often outsource the management of portfolios to a wealth manager and then charge a hefty premium on top for their advice", he says. Unfortunately, it's not easy to compare costs many private banks only specify fees upon application, and there are no "comparison sites" for private banking. However, as an example of what to expect, at a more basic level, for a "sole banking relationship" at Coutts you can expect to pay an annual tariff of £900, charged quarterly, while C. Hoare & Co. charges £60 a month for each current account held, though these fees can be waived if you hold more than a certain minimum amount with the bank in question.

High-street banks get in on the action

Even if you decide just to use the private-banking service of a high-street bank, the expectation is that you will still get better service than if you pop into a branch at lunchtime to pay a bill. At HSBC, for instance, you get a "dedicated relationship manager". At Lloyds it's an "advice manager" who can help clients draw up a financial plan, providing advice on areas including investments, planning for retirement, wealth and inheritance tax.

Challenger banks have also moved into the private-banking sector. Metro offers a private-banking service to those with £1m of assets or borrowings with the bank, which can include a mortgage. "We don't do investment advice or insurance sales," says Julie Barnsley, head of private banking at Metro. "We just do the banking bit" which includes current accounts, savings, mortgages and loans, coupled "with an old-fashioned relationship service". Its managers are recruited from other private banks, and they have around 40 to 60 customers each. For an entrepreneur, a manager might oversee their personal banking and that of their family, the trading of the business, and the lending for a portfolio of properties.

This certainly sounds a far cry from the anonymous treatment and sometimes garbled responses I get as a normal client with my bank. The closest I came to premium treatment was when my mortgage adviser was 30 minutes late to an appointment and promised me a bottle of wine and chocolates as an apology. They never arrived.

So should you use a private bank?

This is probably the key attraction of a private bank the relationship. Indeed, when a 2015 Deloitte survey with private banks and wealth managers asked what would most differentiate their institution from others in the next five years, the overwhelming majority answered: "client relationships". "In many cases, when clients leave an institution, it is because of a lack of understanding with the relationship manager and not investment performance," reported the survey. So if you're looking for a personal manager for your finances, for a one-stop financial shop, or you're keen to network at client events through your bank, then private banking might be for you provided you can afford it. But otherwise, these services could be unnecessarily expensive. If you take a more hands-on approach with your finances, or if low cost is your first priority, it might be better to give it a miss.

Slightly longer than a year ago, when Barclays woke up one day "to find a bull called Bramson in the shop", the City prepared for some sport, says The Guardian. "An activist investor out of New York, with a taste for barging into boardrooms and metaphorically smashing up the crockery," Bramson had taken a 5% stake in the bank in hopes of dictating terms. His chief aim drastically shrinking Barclays' underperforming investment arm put him in direct conflict with CEO Jes Staley (an American, formerly of Morgan Stanley) who had staked his reputation on reviving it as a key engine of the bank.

Trousers from another era

At last week's annual general meeting, Barclays was partially relieved of a troublesome thorn when shareholders voted overwhelmingly to deny Bramson a seat on the board. But this saga is far from over. The financier and his Sherborne investment fund have vowed to fight on and the battle will doubtless be closely followed. Not least because Bramson, who was born in Britain but left in 1975 aged 24, cuts such an intriguing figure not just among corporate raiders but in the 21st century itself. "His suits feature high-waisted trousers from another era and he speaks with a patrician transatlantic accent that gives the impression he has just stepped off the set of a 1940s film," says David Crow in the Financial Times. As one vanquished chief executive later acknowledged, he is also "very quietly spoken, so it's often difficult to hear what he says".

Bramson is such a reserved, not to say reclusive, individual that commentators can't really agree about his character, even though he has been targeting a hotch-potch of underperforming UK companies from his Manhattan eyrie for the past 15 years. In previous tussles, notes The Guardian, Bramson has "never been accused of being excessively charming". Yet the Financial Times singles him out for praise as "the polite activist". Bramson is probably at his most accommodating once a victim has rolled over. After ousting Keith Hopkins, the boss of chemicals group Elementis, in 2005, he wrote "a very kind letter" thanking him for minimising the "disruption" and dangling non-exec roles in "some of his other ventures" as a reward, Hopkins told Crow. One thing almost everyone agrees upon is his extraordinary power of tenacity, says The Daily Telegraph. Behind that "stony face" lies great reservoirs of "steely patience".

Fleeing Labour in the 1970s

Bramson, 68, was born "transatlantic", says The Observer: his mother was British, his father American. Although he spent his early years in England, he upped sticks to Manhattan as soon as he could in the 1970s to get away, he later said, from a country in the doldrums run by a Labour government he viewed as "dirigiste". Once in New York, he got into private equity and wasted no time starting his own firm.

Over the years, Bramson developed a distinctive modus operandi. He "typically" buys a sizeable stake, demands a seat on the board, and then pushes "for cost-cuts, payouts to shareholders and other changes that boost returns". There have been setbacks: in 1987, Bramson reportedly lost $60m when a deal to buy a recording company went pear-shaped. But the over-riding arc of his career has made him immensely rich.

In recent years, the Sherborne fund has reaped average annual returns of 22.8% and attracted big investors such as BlackRock and Aviva. For Bramson, that is sweet revenge for past insults. In a rare interview in 2015, he said he had been called "pond scum".

"Sad to say, most people are still keeping their money where it is least likely to do them much good," says Ian Cowie in The Sunday Times. Three times more cash Isas than stocks and shares Isas were set up in 2017-2018, with £7.8m funnelled into cash and £2.8m into the stockmarket, notes Cowie.

Those who deposit money with a bank opt for a guarantee that they'll get some interest and their money back. But in times when inflation has risen beyond the interest provided by most bank accounts, this will destroy your wealth."With inflation outstripping cash Isa returns by about 2%, your £100,000 lump sumwill fall to just £81,790 in real terms over ten years," says Michael Martin of Seven Investment Management in the Financial Times.Every year, however, we receive a powerful reminder that equities are far more likely to produce high medium- and long-term returns than cash deposits or lending to governments (which is also prone to inflation).

The latest annual Barclays Equity Gilt Study shows that since 1899 British stocks have returned 4.9% a year in real terms, compared to 1.3% for gilts and 0.7% for cash. Over the last decade, the respective figures are 5.8%, 2.7% and -2.5%. An investment kept for five years at any stage since 1899 has had a 76% chance of outperforming cash and a 72% chance of doing better than gilts. Extend the holding period to ten yearsand those figures climb to 91%and 77%.

The stockmarket continuously beats cash because shareholders own the companies that produce many of our goods and services, so they're "likely to benefit from improvements in efficiency and inventions that occur over time", says Cowie.As economies grow, their companies' profits expand and an investor's share grows with it. It's the short-term volatility that puts investors off equities, but they should grit their teeth and ride it out. Despite some awful years, including two world wars and a depression, equities still came out ahead.

Income is crucial

If you're worried about volatility, "calm yourself by thinking about the incredible power of dividends to alleviate market turmoil", says Martin. Last year, the FTSE 100 index made zero share-price gains, but it delivered a 5% return from its dividends. The Barclays study also shows that reinvesting income dividends is crucial to healthy long-term returns. If you invested £100 in UK stocks at the end of 1945 without reinvesting the dividends, the amount would now be worth £244 after inflation. But with reinvested income the initial stake would have climbed to £5,573. It bodes well, then, that payouts kept climbing last year: the FTSE All Share dividend gained another 8% in 2018.

Silver will hitch a ride on gold

While gold has been rallying over the last six months, silver's performance has been underwhelming. But this could soon change. "As investors' appetite for gold improves, silver might share in the yellow metal's prosperity," says Myra P Saefong on Barron's. Silver, like gold, is a monetary metal, deemed a safe haven and store of value. It tends to mimic gold's movements but is typically more volatile as the market is smaller.

One "real risk" is inflation. says WIll Denyer of Gavekal Research. Investors are looking the other way thanks to the recent growth scare. But the outlook is improving and given the extremely tight labour market and rising wages, there is a danger that US "inflation and inflation expectations rebound to levels that are too high for comfort". That would raise the prospect of higher interest rates, and "equities... are unlikely to respond kindly". The possibility of further trade disputes worsening is another risk that could stoke demand for a safe haven.

Meanwhile, mine production is "stuttering", with the largest silver mines seeing output drop by 9% last year, according to Ross Strachan of Capital Economics. So the demand and supply picture also bodes well.Silver is also an industrial metal and used in solar panels, which are a growing source of demand. Other areas using silver include medicine and electronics. Capital Economics expects the silver price to gain 16% by the end of the year.