10 years on from the financial crisis, Banks are back with a bang. With a global share price rally of just under 20% in 2017 according to MSCI, global banks have come a long way from the dark days of 2008.

Following tales of brash bankers’ bonuses, and never being far from a new scandal, a lot has been done to turn around their reputations in the post-crisis world.

But will 2018 finally see their shackles cast off by the Trump administration, while central bankers reign in their purse strings after years of generous spending?

This report explores ongoing themes that will move the UK banking sector, and also looks into what we can expect from each of the big four banks in 2018.

Central Banks Ween the Market

The post-crisis period has been defined by the immediate action of central banks to stem financial concerns. A key provision, enacted by monetary policymakers from Europe to Japan, was Quantitative Easing (QE) – the purchase of public and private debt by central banks, while simultaneously reducing interest rates to their lowest ever levels.

10 years on, only the Federal Reserve has ended its QE programme and started raising interest rates, while the European Central Bank (ECB) began tapering its asset purchases at the tail end of 2017 and the Bank of England continues its vast QE cycle.

But 2017 did show the tide may be turning. On top of hiking interest rates, the Fed is ending reinvestment of its QE profits, while the ECB may look to extend its taper later in the year. And although the BoE hasn’t made an announcement on a sustained hiking cycle yet, 2017 saw its first interest rate hike in 10 years.

Trump’s First Act: Tax Reforms

Not everything went in favour of President Trump during his first year. But after months of cracking heads, his administration finally achieved a legislative victory – the first US tax reform in 30 years.

Cutting the main corporation tax rate to 20% from around 35%, one of the world’s highest, has resulted in a number of both US-based and US-exposed firms announcing a one-off hit to Q4 profits, however the reform is also expected to raise future earnings.

How these banks manage the new legislation going forward, through reinvestment, dividends or share buybacks, will be the key to 2018 performance.

And Republicans’ Tough Second Album

With tax reform marking a major moment not just for Trump, but also for Republicans, the administration hopes the average worker will benefit enough to secure a victory in mid-term elections in November.

However, what Trump does next will also be key.  There are multiple ideas of what the President will decide, although widespread sector deregulation seems to be the Republican’s preferred dish.

Whether that will extend to a vast repeal of the Obama era Dodd-Frank regulations – including the Volcker rule which bans internal proprietary trading – remains to be seen. However, with trading profits falling at investment banks across the world, many could look favourably on such a decision to repeal.

Overleaf, we delve deeper into the four main UK banking stocks, exploring the 2018 trends that will affect each of the institutions key to the UK economy.