Britain’s four biggest banks are set to report combined annual profits of about £33 billion this year - higher than the windfall taxed North Sea oil and gas sector.
Rising interest rates are forecast to swell profits at HSBC, Lloyds Banking Group, NatWest and Barclays, who all release Q3 results next week.
The scale of their profits, based on analysts’ predictions in today's Times newspaper, could bolster the case for Hunt, the new chancellor, to hit the industry with higher taxes.
Profit predictions
City analysts expect Lloyds to unveil third-quarter pre-tax profits of £1.8billion and for its annual profits to amount to £7.2billion.
NatWest is forecast to have earned £1.3billion in the three months to September 30 and £5billion for the year.
Barclays, which also has a big business in the United States, is estimated to have made pre-tax profits of £1.8billion in the quarter, rising to £6.9billion for the 12 months to the end of December.
HSBC makes most of its money in Asia and is expected to generate annual profits of $16.1billion this year.
Russ Mould, Investment Director at AJ Bell, said: "UK banks have shown tentative signs of an upturn and that could prove a powerful combination when added to accelerating loan book growth."
He added: “It may well be too soon for the UK banks to comment on the recent economic and political turmoil, but shareholders and analysts will look to any guidance given for the fourth quarter and full-year 2022 figures to see if events in Westminster are starting to have an impact on the real world.”
Trouble on the horizon
However, there may be trouble on the horizon for UK banks
A surge in bad debts as rising interest rates saddle homeowners with more than £50bn of added mortgage payments, an analyst has warned.
Ed Firth, a banking analyst at Keefe, Bruyette & Woods, told the Daily Telegraph that higher rates will push many borrowers into “dangerous territory” and result in higher impairments for Britain’s lenders.
While higher borrowing costs boost banks as they can charge more for lending, they also threaten to drive up defaults as loans become more expensive to pay back and economic activity slows.
Mr Firth said: “Higher rates are better for returns, but only if achieved in a calm, predictable manner. They need to be just right - not too hot and not too cold.”