Financial services firms issue 51 profit warnings in 2020

Listed financial services firms have issued 51 profit warnings in 2020, ahead of the second nationwide lockdown in England, according to EY’s latest analysis.

Some 88% of firms’ profit warnings cited Covid-19 as the reason for the material downgrade in their financial performance over the past year.

The 51 profit warnings have been issued by 41 companies, which represent 28% of UK-listed financial services firms.

EY found the sharpest rise in profit warnings continued to be from FTSE sectors with a retail focus, including non-life insurance, banks and finance and credit services.

Tom Groom, UK head of Financial Services Strategy and Transactions at EY, said: “As a whole, despite a flood of profit warnings this year, the UK financial services industry remains relatively resilient due to it entering the crisis well capitalised. 

“The extensive impact of Covid-19 within the travel, leisure and hospitality sectors has had a direct effect on the non-life insurance sector, with claims related to event and travel cancellations and business interruption rising significantly this year.”

He added: “The pressure on firms is unlikely to be alleviated in the short-term now that England has entered a second lockdown and similar restrictions remain in place across the UK, meaning challenges around profitability could be exacerbated further. 

“Covid-19 has also impacted spending habits this year, and research is showing that people are being more careful with their finances and trying to save more. In the short-term, this places financial stress on firms due to consumers borrowing less.”

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