NatWest Group PLC (LSE:NWG), Lloyds Banking Group PLC (LSE:LLOY) and Barclays PLC (LSE:BARC) are expected to anchor a steady set of first-quarter results from the UK banking sector at the end of April, with analysts expecting steady earnings but a sharper focus on the outlook.
Income is set to remain supported by higher interest rates, with RBC Capital Markets noting that recent moves in swap rates should “result in higher structural hedge income”, as markets have moved to factor in a potentially longer pause from the Bank of England due to inflation worries stemming from the war in Iran.
NatWest is seen as one of the strongest performers. RBC says it should be the “largest beneficiary in the near term” from hedge income, while for UBS it is one of its “most preferred” names, alongside Barclays.
Lloyds is also expected to hold up well, particularly on margins. RBC points to the bank “being more disciplined in deposit pricing”, which should translate into “lower volumes but better margins” as competition for savings intensifies.
Barclays, however, faces a more mixed backdrop. RBC warns that “macroeconomic downgrades could hurt BARC the most”, reflecting relatively optimistic assumptions compared with peers.
Emerging themes
Across the sector, analysts expect several themes to emerge in the first-quarter numbers.
Deposit competition has picked up, with RBC highlighting “elevated competition in the cash ISA market”, while impairments are likely to edge higher as banks update economic scenarios.
At the same time, UBS flags a shift in investor thinking, noting a “prevalent view” that the UK needs rate cuts to avoid a material economic slowdown. That tension between strong current earnings and a more uncertain outlook is likely to dominate results commentary.
The FTSE 100's more international lenders may see more volatile Q1 results.
UBS says HSBC Holdings PLC (LSE:HSBA) and Standard Chartered PLC (LSE:STAN) “should show attractive trends in markets revenues and wealth income” but cautions on “a potentially noisier print”.
With capital returns still strong, the sector enters results season on a solid footing. The key question is whether that resilience can persist if the rate backdrop begins to shift.
Barclays reports on Tuesday 28 April, with Lloyds and Santander UK on Wednesday, and Stan Chart on the last day of April, with NatWest occupying its favourite Friday slow on 1 May. HSBC arrives after the bank holiday weekend, on Tuesday. 5 May.