J.P. Morgan Sees UK Bank Surcharge 5%

J.P. Morgan raises base case, expecting UK banking surcharge to increase from 3% to 5% due to Labour left‑wing pressure.
The hike may cut 2027 EPS by up to 2.7% for Lloyds and 0.6% for HSBC, with ROTE drops of 52‑12 bps.
J.P. Morgan warns reserve remuneration changes could cut profits up to 48% for Barclays if reserves earn 0% interest.
Despite political risks, the firm prefers UK Asian/Irish banks and rates NatWest and Barclays overweight at 6‑6.5x PE with ~10‑11% yield.