Banks are confounding critics and investors should take note.11 Nov 2020 07:46
The Telegraph
11 November 2020 • 6:00am
Profits on mortgages are on the up and dividends could restart in 20211, experts say.
Bank shares have been a poor place for investors' cash in the past decade but after beating expectations in the third quarter has the market reached peak pessimism?
Profit made by British banking groups was 73pc higher than had been forecast between July and September, according to investment bank UBS. The biggest factor was the number of people and businesses defaulting on loans, which was significantly lower than anticipated.
Tighter Covid-restrictions have increased pressure on some businesses, however, Jason Napier of UBS said forecasts for the number of bad loans – which significantly affect bank profits – were too high, given government support.
Banks make better margins on loans when interest rates are higher, thus low base rates set by the Bank of England have eaten away at profits.
Although this is unlikely to change in the near future, with the central bank contemplating a negative Bank Rate, there are parts of the market where lenders are making progress and investors should take note, UBS said.
Bank shares have been a poor place for investors' cash in the past decade but after beating expectations in the third quarter has the market reached peak pessimism?
Profit made by British banking groups was 73pc higher than had been forecast between July and September, according to investment bank UBS. The biggest factor was the number of people and businesses defaulting on loans, which was significantly lower than anticipated.
Tighter Covid-restrictions have increased pressure on some businesses, however, Jason Napier of UBS said forecasts for the number of bad loans – which significantly affect bank profits – were too high, given government support.
Banks make better margins on loans when interest rates are higher, thus low base rates set by the Bank of England have eaten away at profits.
Although this is unlikely to change in the near future, with the central bank contemplating a negative Bank Rate, there are parts of the market where lenders are making progress and investors should take note, UBS said.
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