While the different share price reactions to their first-half results might suggest the reporting season for the big UK banks was a mixed bag, behind the headline figures there were a few common themes across the sector which were notable.

The first and most obvious takeaway is higher interest rates haven’t been the cure-all for bank margins and profits which analysts expected at the start of the Bank of England’s rate-hiking cycle.

While the ultra-low interest rate environment following the pandemic was clearly bad for margins, it was generally assumed that rising interest rates would be all good news.

As it turns out, higher interest rates – like higher prices for food and fuel – have had a dampening effect on both household demand for credit and on businesses’ willingness to borrow.

First to report was the UK’s largest lender by market share, Lloyds (LLOY), which as well as its high-street brand owns Bank of Scotland, Halifax and Birmingham Midshires.

Lloyds’ net interest margin – which measures the difference between the interest rate it pays on deposits and the rate it charges on loans and is a key indicator of profitability – increased by just 0.04 percentage points between December 2022 and the end of June to just 3.14%.

Guidance for the full year was no more encouraging, with the net interest margin seen ‘above 3.10%’, while provisions for bad loans increased by £662 million against £377 million last year as the bank took a more downbeat view of the UK economy.

While Barclays (BARC) posted a better-than-expected profit for the half year period, it was largely due to tight cost control and lack of fines, and despite an increase in the dividend and its share buyback programme investors homed in once again on the net interest margin and bad loan provisions.

As well as more than doubling its bad loan charge to £861 million, the bank lowered its margin outlook for the year to ‘around 3.15%’ due to competition for deposits as customers look for better rates on their savings, another negative consequence of the hiking cycle.

NatWest (NWG) got off lightly by comparison, considering its net interest income missed forecasts and its margin guidance for the full year was no better than Barclays’, but its ultra-low level of bad loan provisions and a surprise new share buyback programme were enough to see its shares gain.

Frustratingly, HSBC’s (HSBA) results told us very little about the UK market as they included a big gain on the acquisition of SVB UK, and attention focused purely on its huge share buyback.

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