UK Banks Big Picture: Summer2026: Seeking A Path Through The Noise

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UK Banks Big Picture: Summer2026: Seeking A Path Through The Noise

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15 Jul 2026 11:45:08 ET │ 66 pages

UK Banks Big Picture

Summer 2026: Seeking A Path Through The Noise

CITI'S TAKE

Andrew Coombs, CFA AC

We remain constructive on UK bank fundamentals, with NIM expansion and +44-20-7986-4053

high volume growth. Yet a combination of UK politics and China regulation andrew.coombs@citi.com

has muddied the picture in recent weeks. We believe concerns around both

should now begin to ease, enabling investors to focus on the impressive Saifur Rahman

return trajectories which should again be visible with 2Q26 reporting. We +44-20-7986-3922

continue to be most constructive on the medium-term earnings outlook, saifur.rahman@citi.com

relative to consensus, for NatWest and HSBC, both Buy rated. We also have

a Buy rating on Lloyds vs Neutral ratings on Barclays and StanChart. Rajkumar Choudhary

+91-22-4277-5083

Domestic Banks: Debating Politics & Regulation — A Burnham leadership victory is raj.kumar.choudhary@citi.com

widely perceived to be a better outcome for markets than a pro-longed Labour Canberk Benning

leadership contest, yet it means his policies are still unclear, as is the choice of

+44-20-7986-1046Chancellor. The main transmission mechanism to the UK banks is via gilt yields:

following the recent move lower we trim EPS on lower structural hedge roll benefit, canberk.benning@citi.com

but at the same time also lower our CoE (we apply CAPM, with UK 10-year as a proxy European Banks Team

for risk-free rate) leading us to slightly increase target prices. Encouragingly

fundamentals remain healthy: For FY26 we see NII growth at Barclays of 8%, Lloyds Guru Prasad Chowdhary

9% and NatWest 13%, among the highest in Europe, on hedge roll and volume