Stronger profits from Barclays PLC (LSE:BARC), HSBC Holdings PLC (LSE:HSBA), Standard Chartered PLC and their European peers have raised the prospects of potential bank windfall taxes in the UK and on the continent.
The UK’s new chancellor of the exchequer is expected to reverse the planned decrease in the bank surcharge when he delivers his delayed fiscal statement, which was today confirmed for 17 November rather than 31 October as had been planned.
Opposition parties also called on Jeremy Hunt to raise extra funds for the public purse with a windfall tax, similar to one being proposed for certain energy companies.
“The public will find it hard to stomach banks raking in large profits whilst their mortgage bills spiral out of control,” said Liberal Democrat Treasury spokesperson Sarah Olney.
She said the chancellor should “explore taxing excess profits from the banks, especially if the alternative is painful cuts to our public services”.
Research by analysts at JP Morgan suggested a 'back-door windfall tax' save the government £10bn a year, with a case study of Lloyds Banking Group PLC (LSE:LLOY) pointing to net interest income benefits would be cut from around £4.5bn to less than £3bn at a base rate of 3% over the medium term.
Three of the FTSE 100's banks have already reported results this week, with all three benefitting from rises in interest rates this year.
This morning, despite almost £1bn of costs for a US error and increased bad debt provisions of £0.4bn, Barclays' third-quarter profits of £2bn beat City analyst expectations.
Income grew 17% in the three months to the end of September, the same as the first half, as Bank of England interest rate hikes benefit its margins, with net interest margins strengthening to 3.01% from 2.49% a year ago.
Barclays UK certainly benefitted from increased interest rates, with interest income up 20% in the quarter, and profit before tax surging 69% to £762mln.
Increased market volatility – including the violent swings in the last week of the quarter following the UK government's hapless mini-Budget – led to the corporate and investment banking reporting a record level of income for the first nine months of the year to date of £10.8bn.
Fellow London-listed lender StanChart delivered quarterly PBT up 35% year-on-year, 26% above consensus forecasts, on as income swelled by more than a fifth.
StanChart completed a US$0.5bn share buy-back announced at the second quarter, taking total shareholder distributions announced this year to US$1.4bn.
Barclays has spent £1.5bn on buybacks and with a dividend of 2.25p paid last month said its total capital return equivalent was roughly 5.25p per share.
HSBC has also been paying dividends, paying a half-year payout of US$0.09 per share in September after in August increasing its targeted return for 2023 to 12% or more, up from previous guidance of 10%, and said it will reinstate a quarterly dividend.
Over in Europe, Deutsche Bank today reported one of its best quarters since before the global financial crisis, adding to a list of forecast-beating numbers from continental banking groups in recent days that also includes Santander, UniCredit and UBS.