UK bank share prices may remain relatively resilient in the near-term but JPMorgan expressed caution beyond that.
Ahead of the first-quarter reporting season for the FTSE 100-listed lenders at the end of the month, analyst Raul Sinha at the US investment bank’s London arm said the team continues to avoid domestic UK banks within their ‘top picks’ for the sector.
Into the results, management guidance from the banks is seen as “likely to move higher to incorporate rate hikes”, while asset quality is “still benign”.
Within the sector, NatWest Group PLC (LSE:NWG) and HSBC Holdings PLC (LSE:HSBA) are expected to announce share buybacks and reassure on the outlook.
“Although we expect UK Banks share prices to stay relatively resilient while the base rate is moving up and unemployment remains low, we remain cautious beyond the near term as risk-reward may become unfavourable once [net interest income] peaks and asset quality risks come into focus in H2,” the analyst said.
Standard Chartered PLC (LSE:STAN) kicks of bank results season on 26 April, followed by Barclays PLC (LSE:BARC) 27 April and NatWest on 28 April.
The following week HSBC’s numbers are due on 2 May and Lloyds Banking Group PLC (LSE:LLOY) wraps things up on 3 May.