Proactive Investors - Windfall taxes could be back on the agenda in the coming fortnight as banks unveil multi-billion-pound shareholder returns, according to Brewin Dolphin.
Results from some of the UK’s major listed banks, including Barclays PLC (LON:BARC), Lloyds Banking Group PLC (LON:LLOY) and NatWest Group PLC (LON:NWG), have been tipped by analysts for bumper dividends and share buybacks.
These numbers should also confirm how the sector has enjoyed the move away from low-interest rates and quantitative easing, according to John Moore, senior investment manager at Brewin Dolphin.
Rippling effects from the war in Ukraine and the aftermath of the pandemic have led to interest rates eight times higher than a decade ago, with the Bank of England this month hiking the base rate to 4%.
In addition, banks’ shift towards higher standards of lending to shore up balance sheets has left risker loans to the shadow banking and alternative lending sectors.
These developments all together suggest the results season from the banks has a potential “goldilocks quality,” said Moore.
“It will likely be characterised by the benefits of higher rates, the positive impact this should have on net interest margins, and a lower level of provisioning than might be expected in the current challenging economic environment,” he said.
What this means for UK-focused Lloyds and NatWest is that there is likely to be a focus on cost savings and restructuring, including bolt-on acquisitions, to drive growth.
For Barclays, Moore believes market volatility and rate movements should offset a fall in M&A deals for its investment banking division to work on.