UK banks to follow European rivals in lifting profit targets

UK’s biggest banks, including HSBC and ​NatWest, are set to follow their European counterparts and raise profit targets when they report annual earnings in the coming weeks, ‌people close to the matter said.

HSBC is expected to lift its return on tangible equity (ROTE) outlook – a key measure of profitability – above its current “mid teens or better” guidance, while NatWest is likely to upgrade its guidance for 2027, currently at 15%, to as much as 17%, two people told Reuters.

Barclays , which in October said it expected an ROTE of 12% or above in 2026, should also lift its targets, a third source familiar with the bank said.

Analysts have also said they believe Barclays ‌and HSBC can raise their targets by as much as 200 basis points when they set out guidance for the ​coming years. The banks report their earnings on February 10 and February 25, respectively.

“UK banks have benefited from earnings resilience lasting longer than initially expected, supported by higher interest rates, robust credit quality and tighter cost control,” said Peter Rothwell, head of banking at KPMG UK.

Analysts said that strong run might ‍not be sustainable amid political pressure to support the government’s growth agenda.

“While the current UK government has resisted the temptation to further tax the big banks there is a quid pro quo to this, which is an expectation that they grow their loan books faster and provide more support to the economy,” said Gary Greenwood, analyst at Shore Capital.

That could ⁠end up meaning lower pricing on lending, he added.

Lloyds Banking Group could also lift its targets this year, aiming for ROTE to rise to as ‍much as 18.5% by 2028 from this year’s goal of more than 15%, analysts at Jefferies said this month.

The banks all declined to comment.

Lloyds and Deutsche Bank report full-year ‌earnings on ‌Thursday, kicking off the European bank reporting season following a bumper set of numbers on Wall Street.

UK bank shares rose on Monday, with Lloyds up 1.3%, HSBC and NatWest up 0.5%, and Barclays rising 0.4%, amid a 0.1% fall in the broader FTSE 100 index.

BANKS ACROSS EUROPE PUSHING PROFITS HIGHER

In continental Europe, many banks have lifted their profit goals, signalling confidence higher margins will last for years.

European banking stocks have more than doubled since early 2024 and risen 60% in ⁠the past year – far outpacing U.S. ⁠banks.

Spanish banks Santander and BBVA have ​grown income while keeping costs under control, raising expectations for improved targets.

JPMorgan expects BBVA to have delivered an around 20% ROTE in 2025, broadly in line with 2024, with profitability rising to 22% in 2026 and reaching 26% by 2028.

Santander could target a ROTE by 2028 of around 19–20%, up from 16.1% as of September, Barclays analysts ‍said.

Germany’s Deutsche Bank in November set a new ROTE target for 2028 of greater than 13%, up from its 2025 target of 10%.

Analysts expect Deutsche to confirm it met the 2025 target, alongside figures that could show its biggest profit since 2007.

Volatile markets and a flurry of corporate deals should also lift investment bank earnings, buoying the likes of Deutsche, Barclays ​and UBS , after most Wall Street banks reported rising revenues and a bullish outlook.

France’s Societe Generale, ‍BNP Paribas and Credit Agricole  may buck the trend as higher costs and domestic competition weigh on profits, analysts said.