A positive tone on UK banks was struck by analysts at Citi at the start of 2026, with NatWest Group PLC (LSE:NWG) and HSBC Holdings PLC (LSE:HSBA) seen as best placed to benefit from resilient earnings drivers and macro stabilisation.
In a note focusing on the "big picture" for the sector, analyst Andrew Coombs said concerns over the UK and Hong Kong economies were overstated.
He expects UK loan and deposit growth to remain firm, while commercial real estate risks in Hong Kong – a key overhang for HSBC – "should ease" in the year ahead.
The Citi analyst sees structural hedging as a key advantage for UK banks compared to European peers, helping to sustain net interest income (NII).
Cost discipline was also noted as a positive, alongside continued robust asset quality across the sector.
NatWest is Citi’s top pick, supported by a stronger medium-term NII outlook.
HSBC follows, with improving non-interest income expected to underpin growth.
Standard Chartered PLC (LSE:STAN), another with a strong focus on Asia, is rated 'neutral/high risk'.
Bottom of Coombs' rankings were Barclays PLC (LSE:BARC) and Lloyds Banking Group PLC (LSE:LLOY), both kept on 'neutral' ratings.