HSBC, NatWest, Lloyds: Should you invest in these banks now?

Over the past few years, investors have been ignoring the UK banks. The UK banking sector has delivered a return of 17.5% over the last decade, as compared to the 99.6% return delivered by the FTSE All-Share. A major contributor to the dismal performance of banks since 2009 may be the record-low interest rates and a tight monetary policy.

However, investors have lately been drifting towards the high street lenders. The reason behind this is that the Bank of England (BoE) has been raising the interest rates to counter the impact of skyrocketing inflation. The Monetary Policy Committee (MPC) of BoE has increased the interest rate from the historic low of 0.1% to a 13-year high of 1% recently. The interest rates may be increased further as BoE has warned of inflation crossing 10% this year.

High-interest rates positively impact the profitability of banks, allowing them to make a higher net interest margin. But as the interest rates keep moving upwards amid the spiralling cost-of-living crisis, bad loans among consumers might also increase with the cooling of the mortgage markets. Thus, a higher interest rate may potentially lead the UK towards the same issues faced during the housing market crisis in 2008, which would prove to be detrimental for banks.

Here are 3 leading UK banks that investors may closely watch in this situation.

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1. HSBC Holdings Plc (LON: HSBA)

HSBC Holdings plc’s shares were up by 1.50% and were trading around GBX 533.20 around 3:00 PM (GMT+1) on 27 May 2022. The FTSE 100 bank has provided its shareholders with a return of 19.26% over the last one year as of 27 May 2022. The bank’s current market cap stands at £105,603.22 million.

2. NatWest Group plc (LON: NWG)

NatWest Group plc’s shares were up by 2.24% around 3:00 PM (GMT+1) on 27 May 2022 and were trading at GBX 228.50. The FTSE 100 bank has provided its shareholders with a return of 13.44%over the last one year as of 27 May 2022. The bank’s current market cap stands at £23,422.43 million.

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3. Lloyds Banking Group Plc (LON: LLOY)

Lloyds Banking Group Plc’s shares were down by 0.06% around 3:00 PM (GMT+1) on 27 May 2022 and were trading at GBX 45.31. The performance of the FTSE 100 bank has deteriorated over the last one year as of 24 May 2022 and its one-year return stands at -6.39%. The bank’s current market cap stands at £31,338.64 million.