UK BANKS : Risk v Reward

Research evidence excerpt

UK BANKS : Risk v Reward

EQUITIES

BANKS

Natwest Group ADR  Outperform from NeutralUK BANKS Natwest Group PLC  Outperform from Neutral

Risk v Reward

UK domestic banks have suffered more than most in recent months (with some justification) against11 MAY 2026

Sector Research Report the backdrop of political concerns, a fluid macro picture and elevated UK gilt yields. These risks

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haven’t disappeared but are they now excessively reflected in share prices? We assess the latest

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operating trends, but just as importantly consider downside and upside scenarios around this.

Guy Stebbings, CFA

BNP Paribas London Branch How much downside is there really?(+44) 203 430 8618

guy.stebbings@uk.bnpparibas.com UK domestic banks sit firmly towards the bottom of European Banks on forward multiples following

recent underperformance. Certainly, there are valid arguments – indeed they informed our more

Aditi Vittal

cautious subsector stance. But our latest assessment of downside risks points to greater resilienceBNP Paribas London Branch

(+44) 7345 461 899 than one might imagine. Under a scenario of lower rates, higher impairments and higher taxes, we

aditi.vittal@uk.bnpparibas.com derive statutory returns ranging from 12-15% and share prices today at 10x or less pro-forma FY28e

earnings.

Current trends behaving, with upside scope to earnings

At the same time, latest operating trends, as evidenced in Q1 and detailed in our British Banking

Barometer, offer some comfort. Volume dynamics have been resilient and the margin picture

supportive. We also explore an upside scenario, marking to market for projected rates and derive

mid-single digit earnings upside and a 20% return in the case of LLOY and NWG.