UK Banking Sector: Price, Equity, and Performance Analysis 2018-2022 Case Study

UK Banking Sector: Price, Equity, and Performance Analysis 2018-2022

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Introduction: UK Banking Sector: Price, Equity, and Performance Analysis 2018-2022

The United Kingdom's banking industry has witnessed substantial progress over the past decade. The competitive landscape of the industry has undergone a pronounced intensification subsequent to the global financial crisis of 2008. This phenomenon can largely be attributed to the emergence of novel competitors coupled with augmented regulatory scrutiny. The interaction between price, equity, and performance has recently received more attention within the banking industry. The main goal of this investigation is to look at how price, equity, and efficacy interact in the British banking sector from 2018 to 2022. The banking industry constitutes an indispensable component of the United Kingdom's economy, and thus, the financial sector bears immense significance. The financial industry offers an extensive range of financial services to individuals as well as entities, including governmental organizations. The British financial industry encountered significant changes following the global financial crisis of 2008. The proposed measures aim to enhance the sector's stability and competitiveness. Presently, significant attention is being focused on examining the interdependent relationship in the banking field between pricing, equity, and performance. The purpose of this investigation is to clarify the extent to which the banking industry in the United Kingdom has been operationally efficient in recent times and the resulting impact on assessments of banks and their equity.

Outline of project

Research Aim and Objectives

Aim

The aim of this research is to investigate the relationship between price, equity, and performance in the UK banking sector from 2018 to 2022.

Objectives

• To examine the trend of stock prices of banks in the UK from 2018 to 2022.
• To analyze the equity levels of banks in the UK from 2018 to 2022.
• To assess the performance of banks in the UK from 2018 to 2022.
• To determine the relationship between price, equity, and performance in the UK banking sector from 2018 to 2022.

Research question and justification of the project

Research Question

• What will happen to UK bank stock values between 2018 and 2022?
• Does the UK banking sector's price, equity, and performance have a strong link between them from 2018 to 2022?

The significance of the research subject, which scrutinizes the association among price, equity, and performance in the banking sector of the UK spanning the years 2018 to 2022, can be ascribed to various rationales. The banking industry in the United Kingdom represents a pivotal constituent of the national economy, providing essential monetary facilities to individuals, enterprises, and government bodies. It is imperative to comprehend the recent performance of the sector and its subsequent impact on the stock prices and equity of the banking industry. Insufficient research exists on the relationship between pricing, equity, and performance within the UK banking sector. By providing an analysis of the industry's performance between the years of 2018 and 2022, the present study endeavours to address the significant gap in knowledge pertaining to the aforementioned subject matter.

The discoveries of the investigation hold the potential to significantly benefit policymakers, regulatory entities, and financial stakeholders. The investors can employ the provided data to facilitate well-informed determinations pertaining to the prospective procurement of UK banking institutions. The information can be utilized by regulators to assess the effectiveness of regulatory interventions and recognize prospective expansion domains. The observations may serve as a guiding framework for policymakers to formulate informed decisions with regard to effectual legislation bifurcating the banking industry and the entire economy (Wewege, Lee, & Thomsett, 2020). The inquiry conveyed herein holds great significance due to its potential implications for advancing our comprehension of the United Kingdom's banking industry. It is anticipated that the results of this study will deliver crucial information capable of facilitating informed decision-making in a multitude of scenarios.

Importance of the research context

There exists a crucial need to explore the study environment when analyzing the link between price, equity, and performance within the UK banking industry from the years spanning 2018 to 2022, owing to numerous factors. The banking sector stands out as one of the preeminent and consequential industries within the UK economy. The aforementioned entity provides a diverse array of fiscal facilities to individuals, corporations, and government bodies. The comprehension of the triumph of the sector in the preceding years is imperative as it can wield a substantial impact on the entirety of the economy. During the period between 2018 and 2022, the banking sector is expected to undergo significant changes, which constitute the setting of this study. Within this period, the industry has encountered a multitude of challenges, encompassing augmented competition, fluctuations in consumer conduct, as well as the ramifications of Brexit. Gainful comprehension of how pricing, equity, and performance have interacted throughout this period can yield a remarkable understanding of the industry's reactions to the aforementioned challenges. The research milieu of the banking sector of the United Kingdom is a potential source of knowledge pertaining to worldwide banking trends. The United Kingdom stands as one of the most eminent financial hubs globally, with its banking industry's flourishing state serving to prognosticate the trajectory of the international sector's performance (Miralles?Quirós, Miralles?Quirós, & Redondo?Hernández, 2019). Obtaining crucial insights pertaining to the operational efficiency of a pivotal economic sector during a period of significant flux is of considerable importance. As such, the contextual framework of investigating the interplay between price, equity, and performance within the UK banking industry between 2018 and 2022 gains substantial significance.

Literature Review

The literature review chapter presents a comprehensive analysis of the corpus of knowledge pertaining to the association amongst pricing, equitable distribution, and performance within the UK banking industry between the period of 2018 and 2022. The present chapter endeavors to establish a fundamental framework for the research query and methodology through a meticulous evaluation of the available literature. This appraisal aims at identifying areas of incomplete research and comprehensively assessing the materials under study. The forthcoming chapter will commence by providing a thorough elucidation of the concept of the banking sector. Subsequently, it will undertake an exhaustive analysis of the primary performance metrics and factors that bear a significant influence on the success of this sector. This chapter shall investigate the interrelatedness of pricing, equity, and performance within the banking sector, drawing upon relevant theories and empirical evidence extracted from preceding investigations.

Conceptual framework

The Concept of the Banking Sector

The significance of the banking industry in fostering economic growth and advancement is undeniable. With its inherent capacity for facilitating financial transmission services, the industry acts as an enabler of economic expansion and empowerment. The British banking industry is recognized for its ability to generate employment opportunities for a noteworthy workforce consisting of approximately 400,000 individuals (Zhao, Tsai, & Wang, 2019). This sector plays a substantial role in bolstering economic prosperity and progress within the country. The pivotal factor in maintaining the nation's thriving economy rests on its paramount function of engendering ample prospects for employment. According to research conducted by UK Finance in 2020, the financial sector in the United Kingdom is believed to represent roughly 6% of the nation's total Gross Domestic Product (GDP). The industry in question performs a critical role in bolstering economic investments and expenditures through its provision of fundamental credit options to individuals, businesses, and governments.

The banking industry in the United Kingdom can be conceptually segmented into two distinguishable categories, ly retail banking and investment banking. These categories are readily discernible and reflect the divergent natures of the services offered to individuals, small businesses, and large corporations in the UK. The core focus of investment banking revolves around catering to the financial requirements of renowned corporations and affluent individuals who possess substantial personal wealth. In contrast to the domain of investment banking, the emphasis of retail banking primarily centres on proffering a comprehensive assortment of financial products and services that are customized to address the needs of modest entrepreneurs and ordinary customers. Numerous regulatory entities have been instituted with the primary objective of preserving stability and equitable competition within the banking sector. Prominent amongst the prevailing establishments are the Financial Conduct Authority and the esteemed Bank of England. The banking sector holds significant importance within the economic environment of the United Kingdom and warrants ample consideration and reflection. The importance of availability of financial services in propelling economic progress is of paramount significance as it facilitates both the process of investment and consumption (Gallego?Álvarez, & Pucheta?Martínez, 2020). It is imperative to ascertain that individuals receive optimal care through meticulous attention. In order to evaluate the efficacy of banking operations and gain a deeper understanding of the correlations among pricing, equity, and performance, it is imperative to possess a thorough comprehension of the banking industry's structural framework and regulatory mandates.

Factors Affecting Performance in the Banking Sector

The performance of banks in the UK may be impacted by a number of things. The literature study that follows looks at some of the key elements:

• Macroeconomic Factors: The performance of banks is significantly influenced by the nation's general economic situation. Macroeconomic variables including GDP growth, interest rates, and inflation may have a major influence on the profitability and stability of banks, according to Joshi et al. (2020).
• Regulation and Supervision: The supervision procedures and the regulatory environment may have an effect on how well banks function. Strong regulatory and supervisory policies can increase banks' stability and performance, according to research (Ousama, Hammami, & Abdulkarim, 2020).
• Competition: The success of certain banks can be impacted by the degree of competition in the banking industry. Little competition might result in complacency and decreased efficiency, whereas high competition can result in lower profit margins (Miralles-Quirós, Miralles-Quirós, & Redondo Hernández, 2019).
• Technological Advancements: Rapid technological development in the banking industry has given banks both benefits and difficulties. Using cutting-edge technology may boost productivity and customer happiness while failing to do so might lead to poor performance (Kurdi, & Alshurideh, 2020).
• Risk Management: The performance of banks depends on effective risk management. Strong risk management systems enable banks to efficiently reduce risks and enhance performance (Vives, 2019).

The Relationship Between Price, Equity, and Performance

For both scholars and politicians, the link between pricing, equity, and performance in the UK banking industry has been a matter of interest. The following overview of the literature looks at some of the studies on this subject:

Empirical research has substantiated a positive correlation between stock prices and the performance of banking institutions. In this research, Hornuf et al. (2021), carried out a comprehensive investigation. This study furnishes empirical evidence concerning the subject under analysis. In contemporary times, fiscal mechanisms, specifically the return on assets (ROA) and return on equity (ROE), serve as surrogates for assessing the financial aptitude of financial institutions. This inquiry posits that financial establishments with elevated equity valuations display a superior relationship with both returns on assets (ROA) and return on equity (ROE) in comparison to their counterparts with reduced equity valuations. The convoluted interdependence amid stock prices and corporate triumph is susceptible to the influence of several extrinsic factors, including macroeconomic circumstances and investor perception (Almoneef, & Samontaray, 2019).

The correlation between equity and performance is a crucial topic within the discourse of banking operations. As an integral element of a financial institution's balance sheet, equity is posited to exert a discernible impact on the overall efficacy of the organization (Monferrer, Moliner, & Estrada, 2019). Greater equity levels constitute a means for banks to create a cushion against unanticipated losses and, correspondingly, promote their perpetuity. Subsequent research has demonstrated that augmented degrees of ownership can potentially be linked with enhanced performance metrics such as Return on Assets (ROA) and Return on Equity (ROE) (Park, & Kim, 2020).

The correlation existing between equity and stock prices constitutes a key facet that warrants consideration. The investment community's confidence and propensity to assign funds to a financial institution may generate a favourable impact on its capital resources, potentially leading to an increase in the market value of the firm's equity securities. According to Shafi et al., a potential divergence may emerge between the stock prices and equity levels, leading to the possibility that the inflated stock prices may not be a dependable gauge of a bank's inherent value. In the course of their academic investigation. The year 2021 denotes the present chronological period according to Abbas, Iqbal, & Aziz, (2019).

The interrelationship between the dimensions of price, equity, and performance in the banking industry is subject to a myriad of factors that can exert a noteworthy influence on their interconnectedness. Asongu, Le Roux, & Tchamyou, (2019), contend that various factors, such as alterations in market circumstances, adjustments in regulatory protocols, and advancements in technology have the ability to considerably impact the efficacy of financial institutions and the degree of market involvement with regard to their equity securities. Price, equity, and performance in the UK banking industry are said to be in a complicated and interconnected connection, according to the literature. Policymakers, investors, and banks themselves may all benefit from a greater understanding of this connection.

Literature Review Gap

The relationship between stock prices, equity, and performance within the UK banking industry remains inadequately comprehended, despite the abundance of substantial research concerning the sector's performance. Previous studies have predominantly concentrated on the influence of various determinants on the financial performance of the banking industry, neglecting to examine the interdependence between equity and stock prices. The objective of the current research is to facilitate the closure of the knowledge and comprehension deficit in the academic discourse, via a thorough assessment of the relevant empirical substantiation that establishes the connections between pricing mechanics, equity, and efficiency in the banking domain of the United Kingdom. This review will cover a span of data ranging from 2018 to 2022 and will endeavour to offer a critical and analytical examination of the relevant findings. The objective of this evaluation is to draw attention to the lacunae present in the extant scholarship and provide recommendations for prospective research endeavours to bridge these gaps in the field.

Summary

The review of the literature highlights the notable importance of the banking sector to the economy of the United Kingdom, whilst providing pivotal benchmarks for evaluating the efficacy of the banking industry. It also analyses the performance-affecting aspects of the UK banking industry critically and reveals a knowledge gap about the connection between stock prices, equity, and performance. The proposed research will evaluate the trajectory of stock prices, equity levels, and bank performance in the UK and identify the link between these factors in order to fill this vacuum in the literature.

Research Design, Philosophy, and Methodical Approach

The approach used to accomplish the research's goals and objectives is described in this chapter. It gives a thorough explanation of the methodology, approach, data collecting, and analytic procedures used in the research. Although the research technique describes the overall plan for gathering and analysing data, the research philosophy describes the guiding assumptions that inform the study.

Research Philosophy

Figure 1: Research onion

Positivism is the research methodology chosen for this investigation. This philosophy is founded on the idea that by using scientific methods, the social world may be examined in the same manner as the natural world. The positivist method places a strong emphasis on using numerical data to examine ideas and assumptions (Long et al. 2020). As it enables the objective assessment and analysis of the correlation between price, equity, and performance in the UK banking industry, it is suited for this study.

Research Approach

A deductive research methodology was used for this investigation. This method entails gathering and analysing quantitative data in order to put a theory or hypothesis to the test. The deductive technique is suited for this study because it allows the researcher to evaluate existing theories and hypotheses to determine the link between pricing, equity, and performance in the UK banking industry (Giao et al. 2020).

Data Collection

Secondary sources will be used to compile the study's data. The information will be derived from 2018 to 2022 financial reports of UK banks. The financial reports will be gathered from credible financial data sources including Bloomberg, Yahoo Finance, and Reuters as well as the official websites of the institutions. Stock prices, equity levels, and financial performance metrics like return on assets (ROA), return on equity (ROE), and net interest margin will all be included in the data (NIM).

Data Analysis

Quantitative approaches will be used to examine the study's data collection. The trajectory of stock prices, equity levels, and financial performance indicators in the UK banking industry will be described using descriptive statistics including mean, standard deviation, and correlation coefficients. The link between price, equity, and performance in the UK banking industry will be examined using regression analysis. Software such as the MS Excel will be used to analyse the data.

Ethical Consideration

The ethical aspects of any study involving human participants are of utmost significance. The researcher shall ensure that the study adheres to all ethical principles and that the participant's entitlements are duly protected. Consent of the participants will be obtained after providing them with adequate information, and stringent measures shall be taken by the researcher to safeguard their personal data, thereby ensuring confidentiality and privacy. Also, the researcher will safeguard participant data confidentially by identifying them with pseudonyms and employing pseudonyms to identify them. The researcher will also make sure that the information gathered is only utilised for this research and will not be given to any outside parties. The participants will also be made aware of their freedom to leave the research at any moment and without repercussions.

Summary

The research approach that will be employed to accomplish the study's aims and objectives was covered in this chapter. In-depth explanations of the research's philosophies, methodologies, and design were provided. Positive psychology will be the research philosophy used in this study, and the case study technique will be used in the research design. Document analysis will be one of the data-collecting techniques. Finally, measures for ensuring data confidentiality and ethical implications were also covered.

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References

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Almoneef, A., & Samontaray, D. P. (2019). Corporate governance and firm performance in the Saudi banking industry. Banks and Bank Systems, 14(1), 147. Retrieved on: 22.04.2023, from: https://doi.org/10.21511/bbs.14(1).2019.13

Asongu, S. A., Le Roux, S., & Tchamyou, V. S. (2019). Essential information sharing thresholds for reducing market power in financial access: a study of the African banking industry. Journal of Banking Regulation, 20, 34-50. Retrieved on: 22.04.2023, from: https://doi.org/10.1057/s41261-018-0065-4

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