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German economy in sharpest decline since 1970, as markets await US GDP – business live | Business


Since its last update, Lloyds estimates that the economic outlook has deteriorated further, partly because of the immediate impact of the pandemic in its second quarter, but also due to the likelihood of significantly higher defaults on loans in the next few months as various government support schemes subside. As such, its additional impairment charge takes the half-yearly figure to £3.8bn, with the bank guiding that the full-year number will total somewhere between £4.5bn and £5.5bn.

The wider challenges are exacerbated given the bank’s perceived status as a barometer of the UK economy. With GDP growth remaining under pressure and the unemployment rate potentially yet to peak, the uncertainty around Brexit negotiations takes on additional significance given an already faltering economy.

Meanwhile, historically low interest rates are set to hold firm for some considerable time to come, putting pressure on the traditionally lucrative Net Interest Margin, as evidenced by a decline from 2.9% to 2.6% in the period. In addition, the consumer has where possible been paying down loans and reducing spending on credit, both of which are normally steady income lines for the banks, with the result that there has been an increase in retail deposits as any spare cash is put to one side.



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