UK banks head into the first-quarter reporting season with some of the best fundamentals in the sector, but also some of the biggest worries hanging over them.
According to Citi, lenders like Lloyds Banking Group PLC (LSE:LLOY), NatWest Group PLC (LSE:NWG), HSBC Holdings PLC (LSE:HSBA), Barclays PLC (LSE:BARC) and Standard Chartered PLC (LSE:STAN) are boasting high returns and strong dividend yields.
Yet economic uncertainty, from tight UK government budgets to rising geopolitical and tariff risks for the more internationally exposed banks, continues to cloud the outlook.
Consensus forecasts for earnings per share have been upgraded across the board this year, but share prices have been slower to respond. Only Lloyds and NatWest have managed to outperform the wider sector so far.
Citi expects small earnings beats from NatWest, HSBC and Lloyds this week, with all five banks likely to stick to their full-year guidance.
The broker ranks NatWest as its top pick, followed by HSBC and Barclays, while remaining more cautious on Lloyds and Standard Chartered.