Sector focus: Finance part 2
In part 1 of our financial sector focus, we explained how although the industry had seen a decline in job postings and applications, it was slowly on its way back up. This was highlighted by several banks and insurance companies making large profits, helping the industry recover at a steady speed.
In part 2 we discuss the bad press coverage, the complaints and the future of the financial sector.
The bad news
Although there’s been a lot of good news from the industry this year, it’s also seen its fair share of bad news.
While the Lloyds Group saw their shares rise to its highest in four years, some banks didn’t do so well. Santander in particular had to rule out a flotation of its UK arms again after their profits fell by 20% following a drop in interest income in Q1 of this year. They’ve also seen a 20% drop in their pre-tax profits, falling to £549m this year, and a 5% drop in their net interest income.
As well as seeing their profits fall, some banks were fined for not looking after their customers properly. The Bank of Scotland was fined £75,000 after repeatedly faxing customer documents that contained sensitive information (including mortgage applications and account details) to the wrong numbers.
Consumer finance also had its fair share of problems, with complaints rising by 179% in Q1 of 2013. Over 80% of the 150,197 complaints were about mis-sold PPI, while current accounts and mortgages accounted for another 2% each. And it shows no sign of stopping, as according to the FOS, they’re receiving around 2,000 PPI complaints a day.
Many finance companies who mis-sold PPI have faced financial problems as a result, including the CPP Group. They mis-sold insurance on behalf of major lenders to thousands of customers and were fined £10.5m for it. This put 700 jobs at risk, which were only saved when CPP were given a £36m funding package by its banks.
The future of finance
So what’s the future of the finance industry?
Due to the high-profile problems experienced by the banks recently, it’s certainly becoming a more regulatory environment. Companies are more aware of protecting their integrity and seem to be taking greater care in order to win over customers again, and are keen to highlight their ethical behaviour.
However, there is concern amongst some finance professions that an over-regulated environment could have negative consequences for the industry; in particular it could affect the availability of finance jobs. According to a PricewaterhouseCoopers (PwC) report, 265,500 jobs across a range of sectors and a further £50bn boost to the economy could happen if the finance industry had better regulations that weren’t so restricting. The report predicted that if the industry was held back by bad regulations and a weak global backdrop, it could only contribute £9bn to the economy and would only create 12,000 jobs.