Credit Suisse has run what it calls a ‘downside scenario’ for the UK banks in the wake of the latest Covid scare and believes NatWest Group PLC (LSE:NWG) would be the hardest hit.
The net result is an average 10% fall in profitability in 2022, followed by an 8% decline in 2023.
As mentioned above, the impact would be most significant at NatWest. Credit Suisse reckons Lloyds Banking Group PLC (LSE:LLOY) and Barclays PLC (LSE:BARC) “have higher overlays that offer buffers”. The ‘buffers’ are lower at international banks HSBC and Standard Chartered, it added.
“It is probably less likely the market will judge there are unusually higher risks in the UK relative to the global outlook given the outcomes over 2021 with the effectiveness of the vaccine rollout,” CS said in a note to clients.
The domestic lenders (Lloyds, Barclays and NatWest) are attractively valued, according to analysts at the Swiss investment bank.