AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
SWE
GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
.jpg)
Highlights
- 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.
- With interest rates going up, investors have lately been drifting towards the high-street lenders.
- 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.
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.
© 2022 Kalkine Media®
RELATED READ: BEN, HUR, BOR: 3 AIM stocks to watch amid rising inflation
- 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.
- 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.
RELATED READ: DEC, IMB, AAL: Stocks to watch out for with growing fears of recession
- 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.
