By Kunal Sawhney, CEO, Kalkine Group
The banking and financial services industry in the United Kingdom without exception experienced a wide range of hardships steered by the coronavirus pandemic and its long ranging aftereffects. From the severe drop in demand for credit to a moderately high reduction in the volume of deposits, these were some of the major concerns for the banking sector in the initial days of the still-traversing pandemic era.
Massive jobs losses shortened pay scales, tapered sources of income and suddenly high expenditure for availing health and care services from top notch medical facilities remained a challenge for millions. The unforeseen disruption in the periodic earnings of individuals as well as many of the commercial settings, collectively dismayed the banking and financial services sector.
Of late, the banking industry is once again back on the roll with the major UK banks staging a tight-lipped recovery as far as the stock market performance is concerned. A considerable part of the appreciation seen in the share prices has been on the back of the large-scale vaccination programme, the optimism surrounding immunising people against Covid-19 (SARS CoV-2) virus.
Returns up to 75%
Major banks, such as HSBC Holdings Plc, NatWest Group Plc, Barclays Plc, Standard Chartered Plc, and Lloyds Banking Group Plc, have registered a nearly similar growth in their share prices, separately, over the course of the last six months. A momentary dejection from the investors due to the onset of the third national lockdown in the UK, travel restrictions and repeated turmoil in the cross-border trade were reflected in the market prices of aforementioned banking corporations, but most of it was short-lived.
According to the historical data available with the London Stock Exchange, the shares of Barclays and NatWest Group have recorded the sharpest growth in the last six months, with the former rallying a little more than 75 per cent. The stocks of London-based investment bank and financial services giant Barclays have amassed a gain of 75.45 per cent to GBX 187.98 (9 April 2021) from the share price of GBX 105.84 as on 12 October 2020.
In the corresponding duration, shares of the Edinburgh-headquartered NatWest Group have appreciated as much as 74.10 per cent to GBX 196.65 from a level of GBX 112.95 apiece. The stocks of the London-headquartered banking juggernaut HSBC Holdings have garnered a gain of more than 40 per cent. Shares of the market capitalisation leader HSBC Holdings rose 41.9 per cent to GBX 437.40.
On the other hand, shares of the London-based financial services major Lloyds Banking Group shares have risen a little over 54 per cent to GBX 43.42 from a market price of GBX 28.07, while the shares of the London-headquartered bank Standard Chartered have managed to recognise an upswing of 31.27 per cent to GBX 504.60 from the mark of GBX 379.
Developments catalysing economic rebound
The hopes of top-line recovery in businesses and enterprises that have encountered a never-seen-before depletion of revenues in such a short time is another factor that is responsible for the self-induced confidence among the investors.
As England embarks on the second stage of reopening from Monday, 12 April, in line with the exit blueprint laid out by PM Boris Johnson, many commercial setups are anticipating to witness a silver lining in their respective operations as they resume their services after nearly six months as there were many businesses that had to cease their operations after the imposition of the tier system.
Meanwhile, the key interest rate hovering at the record low level has certainly impacted the profitability of the banking channels initially, but the bankers have seemingly adapted to the low interest rate regime and have retrospectively modified their offerings according to the conditions laid out by the Bank of England.
Recently, different macroeconomic indicators gauging the output of services, as well as construction, have comprehensively indicated the sharp uptick in the volumes, thereby reinforcing the pace of recovery from the pandemic-guided troughs.
The surveys released by Markit/CIPS measuring the Purchasing Managers' Index for UK services, manufacturing and construction have, respectively, shown the signs of recovery as the country prepares to move forward with the planned reopening framework and predefined level of easements.
Tags: Natwest Group, HSBC Holdings, Barclays, Lloyds Banking Group, Standard Chartered, UK Banks, Covid-19, Vaccination, Economic Recovery, Stock Market, Bank of England, Banking, Financial Services