3 banking stocks to watch as UK businesses expect inflation and cost easing

Highlights

• According to the survey, UK businesses expect costs and inflation to ease but expect the wage pressures could remain high.
• Wage growth was averaged at a high of 5.7% in February, and it remained unchanged from January.
• Cost pressures remained at a high, rising by 9.8% in the year to February.

With the UK economy ending February slightly stronger than in previous months, many Brits would have anticipated a slowdown in the interest rates. However, with the high cost of living and inflation, the Bank of England (BoE) has warned that all will depend on its survey, giving more clarity.

According to the survey, UK businesses expect costs and inflation to ease, but they feel the wage pressures could remain high. According to the Monthly Decision Maker Panel data (DMP), the Monetary Policy Committee has been deliberating on interest rate figures needed to return to double-digit inflation to its 2% target.

The survey suggested that businesses expect, their output prices to increase by an average of 5.4% over the next year. This is down by 0.4% from the previous month.

Not just this, even the consumer price inflation (CPI) has also dropped in February. The DMP members’ one-year ahead CPI inflation expectations decreased to 5.9%, down from 6.4% in January. Besides, the three-year ahead CPI inflation expectations also declined to 3.4% in February from 3.7% in January.

Wages could remain high

However, year-ahead wage growth was averaged at a high of 5.7% in February, and it remained unchanged from January. That said, this has come down from a high of 6.3% in December. But the realised annual wage growth rose month on month by 0.3% to 6.6%.

Similarly, cost pressures remained high, rising by 9.8% in the year to February and remained unchanged from the previous month. The growth forecast dropped from 8% in January to 7% in February.

The financial markets expect the BoE to raise rates to 4.25% from 4% later this month at the next MPC meeting on  March 23.

Besides, the challenges within the job market remained as 45% of firms struggled to find the requisite workforce. That represents an increase from 35% in January. Not just that, the supply chain disruptions were also reported to have ticked up in February. Around 11% of firms’ non-labour inputs were disrupted in February, up from 9% in January.

Amid this, let’s explore three stocks investors can keep a keen eye on.

NatWest Group plc (LON: NWG)

An award-winning mortgage provider, NatWest Group PLC, on 3 March 2023, was up by 0.51% at GBX 294.00 at the time of market opening. The FTSE-100 constituent’s market cap £28,255.09 million at 08:30 am (GMT). NWG stock has given its investors a return of 24.18% over the last year as of Friday. The company’s current EPS stands at 0.25.

Standard Chartered Plc (LON: STAN)

Another FTSE-100 constituent and one of the leading British banks, Standard Chartered Plc, holds a market cap of £22,707.95 million as of Friday. The STAN stock was trading at GBX 790.80 and was up by 0.38% at 8:30 am (GMT) on 03 March 2023. At 57.82%, the stock has given a decent return to investors over the past 12 months. The year-to-date return is 26.96%, while the EPS is 0.61.

HSBC Holdings PLC (LON: HSBA)

Europe’s second-largest bank HSBC Holdings Plc wasn’t having a good day on the market today as it was up by 0.19% at GBX 620.20%. Catering to a vast network of 64 countries and territories across Africa, Europe, Asia etc., HSBA stock holds a market cap of £ 123,622.22 million, with an EPS of 0.62 as of 03 March 2023. HSBA has given its investors returns of 20.24% on a YTD basis.

Note: The above content constitutes a very preliminary observation or view based on market trends and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.