UK Banks "A super-interesting results set-up" Napier

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UK Banks "A super-interesting results set-up" Napier

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UK Banks Equities

United KingdomA super-interesting results set-up

Banks

Jason Napier, CFA

Cheap, well held, increased competition, govt change and a CMD Analyst

We see a really interesting 2Q26 domestic bank earnings season. We like these stocks jason.napier@ubs.com

which, with the French, are the cheapest in European banks. Still, i) they are also the +44-20-7568 5037

most held in the sector and amongst the most popular of all European equities, ii) we Sanjena Dadawala

think material FY26 outlook upgrades at 2Q are unlikely given increased deposit Analyst

competition, pull forward of mortgage refi, fully invested hedges, continued indifferent sanjena.dadawala@ubs.com

local Rates revenues and some EV write-downs, and iii) updating just post the +44-20-7567 0753

installation of a new Prime Minister whose economic and tax policies are currently Helen Li, CFA

unclear. We think UK domestic bank EPS growth and FCF are undervalued, we like LBG Analyst

for 2030-target optionality, and remain Buyers of Barclays, NatWest and LBG. helen-za.li@ubs.com

+852-2971 6066

Investors are very sensitive to any signs of irrational / increased competition

As we've argued (almost) ad nauseum we think European banks offer attractive risk-

adjusted EPS growth in absolute and relative terms, with improved margins, solid

volume growth, lower credit risk and stable regulation a strong basis for believing the

asset class can compound for attractive total returns. We think those positive attributes

are stronger and more cheaply acquired via the three UK domestic banks than the sector

overall. But with investors overweight there's real interest in any evidence competition is