The Barclays, NatWest, and Lloyds share prices plunged on Friday, dragging the blue-chip FTSE 100 Index. NatWest stock plunged to 512p, down by almost 10% from its highest point this year. 

Windfall tax proposal drags Barclays, NatWest, Lloyds share prices

Lloyds share price plunged by over 7.2% from the year-to-date high, in line with our recent forecast. That prediction identified a giant rising wedge chart pattern on the daily timeframe.

Barclays tumbled to a low of 355p, down by over 6.17% from the YTD high. Other large bank stocks like HSBC and Standard Chartered also slumped. 

The main catalyst for the ongoing plunge is the renewed calls for Rachael Reeves to implement a windfall tax on these companies for benefiting in the high interest rate era.

The current pressure came from the Institute for Public Policy Research, which noted that these banks had benefited from state subsidies from the Bank of England’s quantitative easing that inflated prices. 

It is unclear whether Reeves, who faces a big hole in the budget will follow through the proposal, which the think tank argues would raise £32.5 billion in the next five years. It noted that the levy would even leave Reeves with an extra $3.2 billion. 

Bank have always opposed a windfall tax arguing that it would make the country’s financial sector unattractive. Their representative said:

“Banks based here already pay both a corporation tax surcharge and a bank levy. Adding another tax would make the UK less internationally competitive and run counter to the government’s aim of supporting the financial services sector.”

UK bank stocks have boomed

The call for a windfall tax comes at a time when the UK bank stocks have boomed this year. Lloyds share price has jumped to the highest point since 2007. 

Barclays stock peaked at 380p this year, the highest level since August 2007 and 515% above the lowest level this year. NatWest, which owns Coutts and Royal Bank of Scotland (RBS), crossed 500p, and moved to the highest level since 2008. 

These banks have all benefited from the era of high interest rates, which has helped them to buy back their stock and boost their dividends. 

The most recent results showed that Lloyds Bank’s net interest income rose to £6.65 billion in the year’s first half to £6.65 billion, up by 5% from last year’s £6.3 billion. 

Barclay’s net interest income rose to £7 billion from £6.1 billion, while NatWest’s figure rose by 13% to £6.1 billion. Still, analysts predict that the era of this profit boom may be ending as the Bank of England (BoE) slashes interest rates.

It is unclear whether the ongoing slump of top stocks of companies like Lloyds, Barclays, and NatWest will continue. However, the stocks could rebound if Reeves rules out windfall taxes.

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