Shares in the UK’s top FTSE 100 banks, Barclays, Natwest, Lloyds and HSBC have all hit decade highs this year, producing more than £80bn in market value.
The banking sector is the second-best performing FTSE 100 sector this year with a return of 37 per cent, second only to the defence sector.
The FTSE 100’s Big Five banks – HSBC, Natwest, Barclays, Lloyds and Standard Chartered – have created £78.9bn of market value, City AM analysis reveals.
Europe’s biggest lender HSBC has generated the most value, gaining over £28bn in market value this year after its stock jumped nearly 21 per cent year-to-date. At the same time, earlier this month, Barclays recovered to its pre-financial crash share price for the first time.
The FTSE 350 banks index has risen over 30 per cent for the year, making it one of the top-performing indices on the London market.
Investors flock to FTSE 100 banks
Russ Mould, investment director at AJ Bell, told City AM: “Investors seem happy with banks as rather dull utilities, which churn out consistent profits and generous cash payouts, rather than the sort of freewheeling lenders and speculators that eventually got themselves, and the global economy, into trouble as a result between 2007 to 2009.”
Banks have also stepped up their game to lure investors in over the last year.
HSBC, Barclays and Natwest made up half of the £10.7bn in FTSE 100 dividends in April.
Natwest hiked its interim dividend to 9.5p per share following its second quarter results, up 58 per cent on the previous year. The bank – which returned to private ownership at the end of May – also kicked off a £750m share buyback programme.
Meanwhile, Lloyds’ interim dividend surpassed expectations of 1.17p per share to 1.22p.
Mould said: “The dividend payments and buybacks still make for a heady combination for income-seekers”.
The Big Five banks are expected to return 11 per cent of their stock market valuations via dividends and buybacks in 2025 alone – a figure Mould said “easily outstrips returns on cash, benchmark 10-year gilt yields and the prevailing rate of inflation”.