Investors In Barclays PLC, HSBC Holdings plc, Lloyds Banking Group PLC And Royal Bank of Scotland Group plc Should Fear A Hung Parliament

The politics are turning ugly for investors in Barclays PLC (LON: BARC), HSBC Holdings (LON: HSBA), Lloyds Banking Group PLC (LON: LLOY) and Royal Bank of Scotland Group plc (LON: RBS), says Harvey Jones

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

With the exception of Nicola Sturgeon, nobody is relishing the prospect of a hung Parliament.

Investors will be particularly wary, especially if they hold shares in Barclays (LSE: BARC), HSBC Holdings (LSE: HSBA), Lloyds Banking Group (LSE: LLOY) (NYSE: LYG.US) or Royal Bank of Scotland Group (LSE: RBS). 

Hard Labour

The banks have grown used to being whipping boys since the financial crisis (often deservedly so).

They are also accustomed to being treated as ATMs by any politician with a spending commitment they want to pretend is properly funded.

Last year, shadow chancellor Ed Balls pledged to revive the windfall tax on bank bonuses if Labour wins power, originally imposed by Alistair Darling in 2009.

But Labour isn’t the only party the big banks have to fear.

Tory Trouble

In last month’s Budget, Chancellor George Osborne announced a £5.3bn tax grab on the banks, by raising the bank levy for the eighth time in four years. This tax is now four times higher than originally proposed in 2010.

Taken with measures announced in last December’s Autumn Statement, the banks will pay an extra £9.3bn in taxes.

Remember, Mr Osborne is supposed to be a business-friendly Conservative chancellor.

Horse Whipped

Now imagine what politicians will threaten if we get a hung Parliament, and months of unseemly horse trading.

While the Tory-Lib Dem coalition was sewn up in just a few days, negotiations could be far more stretched at this time.

Picture a patchwork government of Labour, the Scottish Nationalists and Plaid Cymru. And maybe even the Greens. Then consider the spending pledges a weakened Mr Miliband would make to keep everybody happy.

How would he pay for them? Hmm…

The Scottish Nationalists have nothing to lose by attacking the London-based banking sector, and plenty to gain both financially and politically.

The longer it all goes on, the worse it will be for the banks. HSBC is already threatening to decamp. It may be making idle threats for now, but a hung Parliament could give it the incentive to get off its backside.

The bankers are nervously keeping their heads down. Witness the refusal of major banking figures to back any Conservative policy during this election campaign.

Taxing Times

The campaign has already seen Labour threats to introduce higher taxes for the banks and a market share test for the biggest lenders. The Lib Dems want banks to pay a higher rate of corporation tax than other sectors.

I can hardly guess what punitive wheezes politicians will conjure to fund all the giveaways needed to keep the next coalition together.

A hung Parliament could leave investors in the big banks feeling drawn and quartered.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »