Shareholder Value Evaporates as Tax Spectre Haunts UK Banks

Billions in shareholder value evaporated on Friday as the spectre of a new tax began to haunt the UK’s banking sector. A report suggesting a windfall levy on lenders was enough to spook the market into a sell-off that wiped £6.4 billion from the value of the nation’s top financial institutions.
The spectre was raised by the IPPR thinktank, which published a paper arguing that the £22 billion annual public cost of the quantitative easing (QE) program represents a “windfall” to banks that should be taxed. This ghostly suggestion of a future liability was enough to have a very real impact on present valuations.
The market’s fearful reaction was seen in the plunging share prices of NatWest, Lloyds, Barclays, and HSBC. The evaporation of £6.4 billion in value shows how quickly and dramatically a perceived threat can be priced in by investors, turning a policy idea into a multi-billion-pound problem.
Until the government provides clarity on its intentions, this spectre is likely to continue to haunt the sector. As Richard Hunter of Interactive Investor noted, the government’s financial difficulties mean that such rumours have an “exaggerated impact,” creating an environment of fear and uncertainty that is toxic for shareholder value.