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Highlights
- The Bank of England (BoE) will conduct its monthly monetary policy meeting on 4 November 2021.
- Speculations are rife that BoE might hike interest rates to control surging inflation in the UK.
The Bank of England (BoE) will conduct its monthly monetary policy meeting on 4 November 2021. Speculations are rife that BoE might hike interest rates to control surging inflation in the country. Investors anticipate an initial rate hike of 15 basis points or 0.15%, which will take the UK’s benchmark interest rates to 0.25%.
Most analysts and market experts have earlier predicted central bank might hike rates in December 2021. However, the recent Office for Budget Responsibility (OBR) outlook document predicted a further rise in inflation rate to around 4% to 5% in 2022, which might push the central bank to speed up and act at the upcoming meeting.
FTSE bank stocks to buy amid speculation of interest rate hike
Interest rate hike might increase volatility in the stocks markets and could see some profit bookings from investors as the rise in interest rates increases the borrowing costs for the businesses, which means lower profits, leading to a similar impact on stock prices. Also, the interest rate hike encourages people towards more savings in banks, which is beneficial for the banks.
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Let us look at 3 FTSE listed banks that might have a positive impact amid speculation of interest rate hike:
Lloyds Banking Group Plc (LON: LLOY)
It is one of the largest financial institutions in the UK that provides retail and commercial banking services to over 25 million customers. FTSE100 listed company reported an excellent recovery after the Covid-19 pandemic. In the first nine months of 2021, the bank reported a total income of £11,072 million, while its net interest income was at £8,249 million, down by 1%. The interest rate hike will benefit the bank as it might improve its net interest income and margins if it has excellent asset quality and asset mix.
Lloyds Banking Group Plc’s last close was at GBX 50.22 on 29 October 2021, with a market cap of £35,654 million. Its current dividend yield stands at 3.8%.
NatWest Group Plc (LON: NWG)
The company serves retail as well as commercial clients offering various financial products and services. It reported a net interest income of £5,870 million in the first nine months, ended 30 September 2021, while its total income was £8,093 million. The company has a positive outlook and expects an improvement in the net interest margins in upcoming quarters. Also, a rise in interest rate will encourage savings in banks, which will provide the lender with a cheap source of money to lend to different businesses, which might boost the profitability.
NatWest Group Plc’s last close was at GBX 221.10 on 29 October 2021, with a market cap of £25,206 million. Its current dividend yield stands at 2.7%.
Standard Chartered Plc (LON: STAN)
The banking and financial service provider has diversified operations in over 70 countries providing various financial products and services. The company will be announcing its trading update for the period ended 30 September 2021. It expects a recovery in the operating income compared to last earnings, which were down by 5% at USD 7,618 million. Also, it is currently carrying out its share buy-back program with maximum consideration of USD 250 million, which will reduce the company’s outstanding shares.
Standard Chartered Plc’s last close was at GBX 494.90 on 29 October 2021, with a market cap of £15,238 million. Its current dividend yield stands at 2.2%.
