archivemarket outlook

Takeovers expand balance sheets without straining themNatWest poised to free itself and grow There has been a distinct danger over the past decade that memories of deal-hungry banks pulling off mega-takeovers and challenging for global dominance might have faded into a folk tale of the sector’s former glories.However, with Barclays (BARC) and building society Nationwide buying Tesco Bank and Virgin Money (VMUK), respectively, the UK’s financial institutions are again finding ways of deploying their excess capital that do not involve sticking strictly to dividends or buybacks. At the same time,...

Investors may well ask how cheap bank shares need to become before anyone decides to buy them again. According to Numis, the sector average price/earnings (PE) ratio is heading towards 5 for the UK’s domestic banks. With interest rate cuts looking at least plausible this year, the associated shrinkage in net margins – and the possibility of a further slowdown in economic growth ahead of those base rate cuts – mean you could be forgiven for thinking that UK banks' best days are behind them. Inevitably, the outlook is more nuanced than this scenario implies. A...