Britain’s big four banks are set for a big programme of handouts to shareholders, according to the latest research from JP Morgan.
In total, JPM estimates around 27% of the UK banks' current market caps are available to fund shareholder distributions or bolt-on acquisition deals.
Barclays is its top pick. but tailwinds are picking up across the sector, suggests the broker, with improving UK employment and spending trends likely to support interest rate hikes.
All of the UK banks are highly geared towards rising interest rates, with JPM expecting a rate rise in December to be followed by two more in 2022.
Mortgage pricing has also improved, said the US bank.
The size of any handouts will likely be determined by the next round of stress tests on 13 December, but the background is favourable, suggests JPM, and capital returns are also likely to be a key focus of the results for 2021.
JPM is forecasting a return of £1bn from Barclays plus a 4% yield.
Lloyds is predicted to initiate a £1.5bn buyback with a 4% yield, while NatWest should continue to buy back the government’s outstanding stake.
Shares in Barclays rose 0.7% to 194.7p, while Lloyds was flat at 49.6p.