AUS
NZ
UK
CA
USA
IND
_10_04_2024_16_38_50_427275.jpg)
Highlights
- UK banks have reported huge profits in the third quarter, representing improvement in the economic outlook.
- Big lenders like HSBC and Barclays have performed better than the market expectations.
- Strong mortgage lending is a leading factor benefiting banks such as NatWest and Lloyds.
Amid recovery from the economic disruptions due to the pandemic, UK banks have reported huge profits in the third quarter, representing improvement in the economic outlook. The same growth wasn’t witnessed in other sectors, particularly due to the covid crisis. Big lenders have performed better than the expectation of analysts, with HSBC reporting a 74% rise in its profits touching US $5.4 billion and Barclays almost doubling its profits to £2 billion due to an increase in trading and deal-making at its investment banking arm.
After the 2008 financial crisis, banks were supposed to put aside a certain amount of cash to cover for potential losses, due to which billions of pounds were set aside last year. But owing to a successful vaccine rollout programme in the UK, the banks were able to use a portion of that cash.
Another reason for higher growth of lenders is that the figures are in comparison to 2020, when profits were hit hard during lockdowns due to less spending and increased savings. Strong mortgage lending is a leading factor benefiting banks such as NatWest and Lloyds. The boom in the housing market has been continuing even though the stamp duty holiday was ended by the Boris Johnson government.
Despite increasing profits, Chancellor Rishi Sunak is planning to cut taxes for banks. From April 2023, the bank surcharge is expected to go down to 3% from 8%. This will help in offsetting the impact of a hike in corporation tax from 19% to 25% in the same year. Thus, the overall tax rate for UK banks will go up from 27% to 28%, and not to 33% which would have hurt UK’s competitiveness as warned by the Treasury.
RELATED READ: Dividends are back: Top 5 UK lenders to pay £7 bn
Let’s take a look at some of the UK banks which may be impacted by the news.
Lloyds Banking Group PLC (LON: LLOY)
Lloyds Banking Group PLC provides both retail and commercial financial services to more than 25 million customers. Its current market cap is £34,628.12 million. It has given a return of 67.20% in 1 year. Its average dividend per share stands at GBP 0.02 and its 5-year average dividend yield is 3.7%. The shares of Lloyds Banking Group PLC were trading at GBX 48.95 at 10:01 AM on 26 October 2021 GMT+1.
HSBC Holdings plc (LON: HSBA)
HSBC Holdings plc is constituent of the FTSE 100 index and its current market cap stands at £90,499.90 million. It has given a return of 38.58% in 1 year. Its average dividend per share stands at GBP 0.17 and its 5-year average dividend yield is 4.5%. The shares of HSBC Holdings plc were trading at GBX 445.40 at 10:24 AM on 26 October 2021 GMT+1.
RELATED READ: Which UK lenders are offering best mortgage rates?
Barclays PLC (LON: BARC)
Barclays PLC’s current market cap stands at £33,756.56 million. It has given a return of 80.97% in 1 year. Its average dividend per share stands at GBP 0.06 and its 5-year average dividend yield is 2.3%. The shares of Barclays PLC were trading at GBX 201.90 at 10:28 AM on 26 October 2021 GMT+1.
Natwest Group PLC (LON: NWG)
Natwest Group PLC is into private banking, personal and business banking, and insurance. Its current market cap is £26,472.99 million. It has given a return of 90.15% in 1 year. Its average dividend per share stands at GBP 0.09 and its 5-year average dividend yield is 1%. The shares of Natwest Group PLC were trading at GBX 233.50 at 10:30 AM on 26 October 2021 GMT+1.
Standard Chartered PLC (LON: STAN)
Standard Chartered PLC is a constituent of the FTSE 100 index, and its current market cap stands at £15.059.97 million. It has given a return of 23.36% in 1 year. Its average dividend per share stands at GBP 0.14 and its 5-year average dividend yield is 1.4%. The shares of Standard Chartered PLC were trading at GBX 492.70 at 10:34 AM on 26 October 2021 GMT+1.
