UKbanks News & Analysis
4 articles
Market Mood
UK Tax Hike Concerns Affect Shares of London Banks
Shares of major British banks declined on Friday amid reports of a potential tax increase on profits. Lloyds Banking Group saw its shares fall by 1.8%, while NatWest experienced a decrease of 1.51%. Barclays shares ended up 0.13% higher, after initial losses. Meanwhile, HSBC and Standard Chartered, which earn a considerable portion of their profits overseas, experienced increases of 1.2% and 0.71% respectively. This market reaction occurs as the UK government is expected to announce a hike in the bank sector-specific surcharge to 8% on October 28, up from the current 3% rate, which was reduced under Rishi Sunak's government in 2023. Finance Minister John Healey is expected to introduce these changes during his first budget as Chancellor later this month. Analysts from KBW estimated the hike could reduce banks' earnings by 6% despite potentially raising £2 billion ($2.67 billion) annually for the UK Treasury. Current tax rates for UK banks exceed 46%, compared to 38.9% in Frankfurt and about 27% in New York. Concerns over the Labour government's approach to financial services have arisen, affecting investment sentiment. The broader geopolitical events and expectations of the new budget have also influenced market dynamics, driving gilt yields and influencing banks' structural hedge benefits. Despite these concerns, analysts at Citi viewed the upcoming budget as a potential 'clearing event' to resolve uncertainties faced by the lenders. Evaluating this backdrop, the fundamentals of UK banks are considered healthy, with Citi pointing towards potential mixed results in upcoming third-quarter earnings.
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UK Banks Face Potential Tax Increase in Upcoming Budget
Chancellor John Healey may announce increased taxes on the UK banking sector in the upcoming Budget. Senior banking executives and the trade body UK Finance have raised concerns, stating that higher taxes could weaken competitiveness and discourage investment. UK's biggest banks made approximately £15 billion in profits during the first half of this year, and already contribute nearly £40 billion to the Treasury annually. Current taxes include a 3% surcharge and a levy on balance sheet assets. The surcharge, formerly at 8% under Rishi Sunak, was lowered when corporation tax rose from 19% to 25%. Restoring the surcharge to its previous rate could raise around £2 billion annually. Furthermore, the bank levy taxes banks based on balance sheet size at rates of 0.1% for short-term loans and 0.05% for long-term loans, excluding mortgages. Some argue that banks could absorb a moderate tax increase without damaging growth. This potential tax increase is significant for investors as it may impact the profitability of UK banks. Increased taxes could decrease banks' ability to lend, affecting their growth and investments.
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UK Banks Face FCA Scrutiny Over Basic Account Access Issues
The UK's financial regulator, the FCA, has found that major banks are not adequately serving vulnerable customers. A mystery shopping exercise revealed that 33% of experiences with basic accounts were rated poor or very poor, covering 298 interactions. Only 28% of cases were deemed good or very good, indicating significant issues in access and service. These basic accounts are essential for over four million people in the UK, as they offer key banking functions without overdrafts. This matters for ordinary investors as it highlights systemic weaknesses that could impact bank valuations and public trust in the banking system.
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Britain’s Banks See Fraud Cases Spike by 30% Amid New Rules
Fraud cases at Britain's banks increased by 30% following the implementation of new refund rules. This surge indicates a significant market response to regulatory changes aimed at consumer protection. The rise in fraud could lead to increased costs for financial institutions, potentially affecting their profitability. Overall, the spike in reported cases reflects ongoing challenges in securing financial transactions for banks across the UK.
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