Banks prosper amid best-performing FTSE stocks of 2024

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Banks were among the best performing stocks in UK stocks this year as higher interest rates boosted the sector despite worries about the domestic economic recovery.

Shares in NatWest were the best-performing stock this year to mid-December, up 101 percent, including price gains and dividends, according to investment website Hargreaves Lansdown.Barclays was the fifth-best performing stock, up 81 percent.

UK lenders have been helped by higher interest rates, which were cut to 5.25 percent in August after nearly a year, allowing them to generate attractive net interest margins, the difference between what they pay out on loans and what they earn on deposits.

Analysts say banks have also benefited from a favorable economic environment, with few defaults, which is positive for lenders.However, the outlook for the economy is mixed. Although the IMF upgraded its forecasts for UK economic growth in October, the latest figures point to a second consecutive monthly slowdown in October.

Suzanne Streeter, head of money and markets at Hargreaves Lansdown, said NatWest in particular had “taken off” this year, pointing to its third-quarter trading results that beat expectations.

“Interest rates are expected to remain slightly higher for longer, supporting underlying performance as net income margins remain tighter,” Streeter said, adding that Barclays also had a weaker-than-expected gain from loans, adding that the bank has a “good handle on costs.”

Standard Chartered was also among the top ten performers this year, growing 54 percent on a total return basis.

In addition to banks, “recovery” stocks — those with the potential to bounce back from the downturn — also performed well, said John Moore, senior investment manager at wealth manager RBC Brewin Dolphin, pointing to aerospace company Rolls-Royce and British Airways owner IAG. On a total return basis, the stock rose 94 percent and 84 percent, respectively.

“Rolls-Royce could be the poster child for a ‘recovery’ not just this year, but for the decade,” Moore said. burners.

“The continued recovery and momentum in aviation also helped IAG, which as a result was able to increase its profitability per passenger and, despite its investment priority and strong balance sheet, still found surplus profits to pay a dividend for the first time since 2019.”

Richard Hunter, head of markets at Interactive Investor, added that the British Airways owner is “definitely on the up” now, noting that the surprise announcement of a €350m share buyback program in November was a further reflection of its strong recovery.

“Indeed, the stock is down 30 percent over the past five years, but the potential for further recovery is evident given the price performance of the past two years, when the stock is up 127 percent,” he added.

Corporate takeovers have featured prominently this year, helping to boost share prices in Hargreaves Lansdown, which was bought by private equity firms including CVC Partners and packaging company DS Smith, which was acquired by US operator International paper- Shares in Hargreaves Lansdown are up 56 per cent this year, while DS Smith is up 85 per cent, both top performers. in the top ten.