October 20, 2022

Britain's banks brace for potential government raid on profits -FT

categories : banking

Shares in British lenders fell as much as 6% in early trading on Wednesday

British banks are bracing for a potential raid on their profits as the government seeks out new sources of cash to shore up its finances, according to a report in the Financial Times.

Shares in British lenders fell as much as 6% in early trading on Wednesday, after the report late on Tuesday said new finance minister Jeremy Hunt was considering extracting more tax from the banking industry.

Shares in Lloyds and NatWest fell as much as 4% and 5% respectively, while challenger Virgin Money tumbled 6%. The stocks later pared some of their losses but were still down on the wider FTSE index.

Britain's Treasury was not immediately available for comment.

Governments across Europe have been weighing whether to slap new taxes on banks to help pay for state support packages for citizens struggling with soaring food and fuel prices, with both Spain and Hungary proposing one-off levies on banks.

Lenders are expected to post bumper profits in the short term on the back of higher interest rates, boosting revenues while many of their customers grapple with rising costs of mortgages, credit cards and loans.

Senior bankers in Britain had been wary of the potential for extra taxes, although one senior industry source said they had had no dialogue so far with Hunt's new team.

Britain already imposes a levy on bank balance sheets and an 8% surcharge on profits, although this surcharge was set to reduce to 3% next year.

Hunt has not yet decided whether to cut the bank surcharge as planned to 3%, the Financial Times reported.

'We urge the government to consider the surcharge very carefully and not put at risk the competitiveness of the UK's banking and finance industry,' a spokesperson for bank lobby group UK Finance said.

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