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Bloomberg
The “extraordinarily loose†fiscal policy announced by UK Prime Minister Liz Truss is set to benefit UK banking stocks, analysts at Deutsche Bank said.
The package aimed at combating rising household energy costs will probably prevent a short-term collapse in the economy, and at the same time encourage further interest-rate rises from the Bank of England — adding to margins on lending — Robert Noble and Rohan Singhal wrote in a note to clients.
The combined effect could be a 13% increase in 2024 sector-wide earnings, they said, noting NatWest Group Plc and Lloyds Banking Group Plc would benefit most. Lenders’ share prices have a 40% upside, on average, they added.
Separately, strategists at Credit Suisse said that the UK remains its top overweight and highlighted “very cheap†British banks as their preferred sector.
Lenders have outperformed even as the pound has slumped, reflecting the benefit of rising rates, according to strategists including Andrew Garthwaite.
The sector is more resilient to potential loan losses than in prior recessions, they said.
The FTSE 350 Banks Index was up 1.6% in London. Meanwhile, the FTSE 100 added 1.3% to turn positive for the year.