UK mortgage approvals fall: Should you hold these banking stocks?

Highlights 

• Mortgage approvals in the UK saw a decline in August 2021, as per the latest figure published by the Bank of England.
• August also witnessed a decline in mortgage borrowing as the stamp duty holiday is set to officially end on 30 September 2021.

Mortgage approvals in the UK witnessed a decline in the month of August 2021, as per the latest figure published by the Bank of England. Mortgage approvals, an indicator of future borrowing, were 74,500, down from 75,100 in July 2021. It is the lowest level since July 2020 when the UK government introduced the stamp duty holiday to support the real estate sector and boost property demand.

Approvals have been declining for the last few months. August also witnessed a decline in mortgage borrowing as the stamp duty holiday is set to officially end on 30 September 2021, and rates will normalise from 1 October 2021 onwards. Net borrowing in the month was at £5.3bn, down by £1.4bn from the 12-month average to June 2021.

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Let us look at FTSE listed banking shares that are in focus and have good investment prospects:

NatWest Group plc (LON: NWG)

The financial institution offers personalised banking solutions to individuals and corporate clients. In addition, it offers various kinds of mortgage loans as per needs and offers wealth management services to help clients achieve their short- and long-term financial goals.

The company has a long history of consistent performance in terms of revenue and profitability. During the first half of 2021, the lender reported a total income of £5,319 million, out of which net interest income (NIM) stood at £3,916 million. Also, the company reported a profit of £1,842 million during the period. As a result of good performance, the board has proposed a dividend of 3p per share. In addition, NatWest Group plans to distribute a minimum of £1 billion per annum over the next three years to its shareholders.

NatWest Group plc shares trade at GBX 224.30, down by 0.09% on 30 September at 8:20 am GMT+1 with a market cap of £25,710 million. The company’s current dividend yield stands at 2.7%.

Lloyds Banking Group Plc (LON: LLOY)

It is one of the largest UK-based financial service providers focusing on retail and commercial banking. It serves close to 30 million customers through its branch network and digital banking solutions.

The company returned to profitability in the six months ended 30 June 2021. It reported a net income of £7,564 million, while its profit before tax stood at £3,905 million. The bank’s net interest income was at £5,418 million, while its loans and advance to customers were at £448 billion during the period.

Also, the company has reintroduced its regular dividend pay-out policy following the lifting of regulatory restrictions on dividend payment during the pandemic period. The interim dividend paid by the company was 0.67p per share.

Lloyds Banking Group Plc shares trade at GBX 46.55, up by 0.24% on 30 September at 8:20 am GMT+1 with a market cap of £32,962 million. The company’s current dividend yield stands at 4.1%.

Paragon Banking Group Plc (LON:PAG)

The company offers financial products and services in the United Kingdom. It offers mortgages on the residential property along with commercial lending and secured and unsecured consumer loans.

The company’s year to date new business volume has witnessed significant growth. The Group’s net loan book increased by 3.9% at £13.1 billion, while its total advances stood at £1,922.3 million during the trading period from 1 October 2020 to 30 June 2021. The company has a positive outlook for the remaining financial year and expects net interest margin to exceed 235 basis points with strong performance projected for the mortgages and commercial division.

Paragon Banking Group Plc shares trade at GBX 551.50, up by 1.10% on 30 September at 8:20 am GMT+1 with a market cap of £1,367 million. The company’s current dividend yield stands at 4.3%.

Tags: Paragon Banking Group Plc, Lloyds Banking Group Plc, NatWest Group plc