Outlook for UK banks

Upcoming 'surprise' rebound

There is a stock market adage that states that it is not wise to buy bank stocks as the economy heads into recession.

In the past this has been wise advice, but this time things really are different. Despite a weak pound, higher inflation and rising gilt yields, the outlook for UK banks today is far more positive than in previous downturns, and we expect banks to appreciate in value in the coming months as interest rates continue to rise. Let us see why. Historically, periods of growth have been fuelled by lending which, towards the end of the boom, becomes excessive and is issued on steadily weaker credit terms. Loan losses rise and bank capital ratios are hit as they record losses. As capital ra...