Consumers Don’t Trust Lloyds Banking Group Plc, Barclays Plc and HSBC Holdings Plc: Can Investors Trust Them?

While UK banks like Lloyds (LSE: LLOY) (NYSE: LYG.US), Barclays (LSE: BARC) (NYSE: BCS.US)and HSBC (LSE: HSBA) (NYSE:HSBC.US) have been restructuring in order to rebuild a positive reputation for themselves following the financial crisis, according to a new report from New City Agenda and Cass Business School, the situation isn’t actually improving.

The report finds that while UK banks have become more resilient institutions based on prudential measures, both employee and ethical results are still negative. This is indicative of a low consumer trust. However, can investors trust these banking giants?

I’d say yes. But first, let’s look at why consumers don’t trust them.

One of the ways to assess the progress of these lenders in terms of gaining consumers’ trust is by looking into financial ombudsman’s complaints data. If for nothing else, this data is useful because it reflects how effective a bank’s internal complaints handling system is.


In the first half of 2014, the financial ombudsman received 62,132 new complaints about Lloyds Banking Group, accounting for 32.5% of the total complaints received by the ombudsman during the same period. Of course, this should not be surprising considering the number of institutions under the Lloyds umbrella. However, considering that this lender’s 15,233 new complaints in the first half of 2009 accounted for just 21.8% of the total new complaints made to the ombudsman, it doesn’t look as if Lloyds has an effective complaint handling regime in place.

Another indicator that customer relationships aren’t improving at Lloyds is that in the first half of 2014, 66% of complaints were resolved in favour of the complainant, compared with 51% in the first half of 2009.


In the first half of 2014, Barclays had 27,487 new complaints. Of these complaints, 66% were resolved in favour of the complainant. By comparison, in the first half 2009, there were only 9,056 complaints about Barclays, with 62.2% of them resolved in favour of the complainant.

However, from the data available to us, it is safe to deduce that there are some improvements with customer relationship at Barclays. Here’s why. Barclay’s complaints in the first half 2009 were 13% of the total complaints reported by the ombudsman. However, in the first half of 2014, that figure was only 14.4% — an increase of just over one percentage point. I would attribute the increase here to the growth in customer base that the company has had between H1 2009 and H1 2014.


In the first half of 2014, 13,240 complaints about HSBC were submitted to the ombudsman. The lender was one of the worst performing banks, with 78% of the complaints resolved in favour of the complainant. By way of comparison, in the first half of 2009, HSBC had 2,969 complaints, with 68.3% resolved in favour of the complainant.

In addition, HSBC’s contribution to total complaints in the first half of 2014 was approximately 7%, compared to 4.3% in the first half of 2009. Based on that, I don’t think it’d  be wrong to say that HSBC’s customer relationship isn’t improving.

While there are other data between the first half of 2009 and the first half of 2014, the point here is to show you how these companies have improved five years on from the beginning of 2009 when many customers were still frustrated due to the financial crisis.

Foolish Takeaway

While customer complaints won’t directly affect the financial results of these companies, it is important to keep tabs on how bankers are handling their customers, as it could be helpful in knowing how banks are viewed by consumers, which could, in turn, influence customer acquisition over the long-term.

Overall though, with the efforts that the managements of these three companies have made over the last few years — which is being reflected in their financial figures — I don’t think investors should panic on account of this report, even though it says there isn’t much improvement. If you’re investing for the long-term, the good structures that these banks have built should convince you to stick with them.

To understand why I said that the low consumers' trust these banks should not discourage you from investing in them, you should take a look at this free report from Motley Fool about investing in UK banks.

The report titled "The Fool's Guide To Investing In Banks" discusses the metrics that you should focus on when looking to invest in any bank. This will help you to stay focused when this sort of news that sparks short-term market movements come around.

You can be sure that the report is free with no obligation. Click here to get your copy.

Craig Adeyanju has no position in any shares mentioned. The Motley Fool UK has recommended HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.