Four main takeaways from UK bank results
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FOUR MAIN TAKEAWAYS FROM UK BANK RESULTS
As Q1 reporting season continues, British banks have a "spring in their step" after a strong set of numbers, according to Matt Britzman, equity analyst at Hargreaves Lansdown.
A FTSE 350 basket of UK banks .FTNMX301010 is up 18.5% in 2024 so far, far outstripping the 8.7% rise in the FTSE 350 .FTLC.
So what are the positive factors behind all this? Britzman has shared four main takeaways from UK banks Q1 results so far.
Firstly, default levels remain low.
"Despite the challenges of rising costs and increasing interest rates, which can make it harder for people to pay back loans, borrowers have shown impressive resilience over the past year," writes Britzman.
Next, higher interest rates for longer could act as a tailwind, and the fact that it looks like rate cuts won't be coming as quickly as some initially expected could be a boon for banks
"It’s still too early for banks to revise their income guidance, but if current trends continue, they may have the confidence to raise guidance in the coming quarters," says Britzman.
The third positive aspect is the fact that the UK economy is improving, including across lending volumes, the housing market and wage growth.
"Domestic-focused names like Lloyds and NatWest, seen as UK economic bellwethers, look best placed to benefit from this trend," he says.
Finally, capital levels are supporting strong shareholder returns, and investors can expect some hefty dividends and buybacks over the medium term.
(Lucy Raitano)
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