LIVE MARKETS-British bank tax could be a buy signal

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BRITISH BANK TAX COULD BE A BUY SIGNAL

Bank stocks across European have struggled in the past few months. An index of major European lenders is down about 10% from its August top with worries about the impact of high yields, global uncertainty, growth risks, and AI causing investors to cool on a previously popular sector. .SX7P

British banks have performed slightly worse. The FTSE350 banking index is nearly 14% off its top, and one factor for this underperformance is worries that banks will see higher taxes next week in Britain's budget. .FTNMX301010

Media reports last week that a tax increase was likely saw share prices nudge lower.

UBS say the market is now primed for a tax rise, "on the basis that banks are arguably less popular than some other industries and that (returns on equity) are higher than they used to be."

But, they say they have "heard some investors share a potential intention to buy banks on a dip which might accompany an announcement of higher tax."

"We think that makes sense," UBS say.

They point to the 'sell the rumour buy the fact' adage, and also say that "a doubling in the current 3% banking surcharge would impact UK banks' profits by ~2% on average, with a ~3-4% the impact for the domestic focussed banks."

This is "Not enough to make these stocks expensive."

They also say that policy stability, after the budget, "is the bigger prize".

(Alun John)

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