REG - NatWest Group plc - Total Voting Rights

Investing.com -- UK banks are preparing to release their fourth quarter 2025 results, with Lloyds Banking Group PLC (LON:LLOY) kicking off the earnings season on Thursday.

According to a UBS preview report, the bank maintains a positive outlook on the sector despite banks outperforming their predictions last year. Investors are currently focused on potential downside risks to pricing and whether meeting consensus targets will be sufficient to maintain confidence given the sector’s recent revaluation.

The report indicates significant investor overweight positions in Barclays PLC (LON:BARC), Lloyds, and NatWest Group PLC (LON:NWG), driven by hedge tailwinds and price-to-earnings discounts.

Strategic updates from Barclays and NatWest may reassure investors about growth forecasts, though there will be sensitivity to any signs of weakening price discipline among lenders.

International banks HSBC Holdings PLC (LON:HSBA) and Standard Chartered PLC (LON:STAN) have each risen approximately 20% in the past three months, with investor discussions centered on long-term growth in wealth management.

UBS believes wealth management offers promise for faster earnings growth and higher returns on tangible equity (ROTE) in the medium term.

On Thursday, Lloyds reported a 12% increase in annual profit, surpassing analyst expectations despite setting aside nearly £1 billion for compensation related to mis-sold motor finance products. The British lender’s profit before tax rose to £6.7 billion for 2025, up from £5.97 billion in the previous year. This exceeded the average analyst forecast of £6.4 billion.

The bank also raised its profitability targets, now aiming for a return on tangible equity above 16% in 2026. This represents a significant upgrade from its previous goal of 12% for 2025.

NatWest is set to report on February 13, Barclays on February 10, Standard Chartered on February 24, and HSBC on February 25. Shawbrook Group PLC (LON:SHAW) will release its maiden post-IPO full-year results on March 12.

UBS remains overweight on UK banks with a preference for lower P/E stocks including Barclays, NatWest, and Standard Chartered.

The report highlights ongoing debates about the relative merits of NatWest versus Lloyds, with Lloyds trading at 9.8x compared to NatWest at 8.5x. Some investors believe NatWest needs a stronger growth narrative beyond hedge tailwinds to progress further.

UBS expects all banks to face investor pressure to take their capital ratios to around 13%, similar to Lloyds’ guidance for fiscal year 2026. The firm also identifies bolt-on mergers and acquisitions as a key theme for 2026.

Investing.com – U.K. stocks were higher after the close on Tuesday, as gains in the Banking, Electrical and Gas, Water & Multiutilities sectors led shares higher.

At the close in London, the Investing.com United Kingdom 100 gained 0.51%.

The best performers of the session on the Investing.com United Kingdom 100 were HSBC Holdings PLC (LON:HSBA), which rose 2.82% or 35.00 points to trade at 1,277.20 at the close. Meanwhile, Vistry Group PLC (LON:VTYV) added 2.71% or 17.60 points to end at 666.60 and NatWest Group PLC (LON:NWG) was up 2.65% or 17.20 points to 667.60 in late trade.

The worst performers of the session were Fresnillo PLC (LON:FRES), which fell 6.92% or 308.00 points to trade at 4,140.00 at the close. Relx PLC (LON:REL) declined 5.13% or 147.00 points to end at 2,720.00 and Sage Group PLC (LON:SGE) was down 5.12% or 53.40 points to 989.60.

Rising stocks outnumbered declining ones on the London Stock Exchange by 972 to 796 and 534 ended unchanged.

Shares in HSBC Holdings PLC (LON:HSBA) rose to all time highs; gaining 2.82% or 35.00 to 1,277.20. Shares in Relx PLC (LON:REL) fell to 52-week lows; down 5.13% or 147.00 to 2,720.00. Shares in NatWest Group PLC (LON:NWG) rose to 5-year highs; gaining 2.65% or 17.20 to 667.60.

Gold Futures for April delivery was down 0.01% or 0.71 to $5,121.59 a troy ounce. Elsewhere in commodities trading, Crude oil for delivery in March rose 2.26% or 1.37 to hit $62.00 a barrel, while the April Brent oil contract rose 2.05% or 1.33 to trade at $66.10 a barrel.

GBP/USD was up 0.67% to 1.38, while EUR/GBP unchanged 0.10% to 0.87.

The US Dollar Index Futures was down 0.77% at 96.11.

Investing.com - JP Morgan has raised its price targets for major UK banks on Tuesday, citing continued re-rating potential and strong growth forecasts through 2027.

The investment firm rolled forward its price targets to December 2027, increasing Barclays PLC (LON:BARC) to 570p, NatWest Group PLC (LON:NWG) to 750p, and Lloyds Banking Group PLC (LON:LLOY) to 117p.

Barclays remains JP Morgan’s "highest conviction idea" heading into fourth quarter results, maintaining its Positive Catalyst Watch rating.

The bank is expected to outline a path to 13-14% sustainable Return on Tangible Equity (ROTE) by 2028 during its upcoming investor update. JP Morgan forecasts fourth quarter total income of £6.9bn for Barclays, supported by positive trends in investment banking and cards businesses.

NatWest’s 4% year-to-date underperformance is "unjustified" according to JP Morgan, given expectations for an ROTE target refresh to approximately 18% by 2028.

The firm cites NatWest’s strong outlook for volume growth, cost discipline, and attractive valuation at 8.0x PE 2027E compared to the sector average of 10.0x as supporting factors.

JP Morgan expects Lloyds to meet market expectations in its upcoming results, with a summer target refresh being the main event where an 18% ROTE target for 2028 could be outlined.

The firm forecasts peak hedge income growth for Lloyds in 2026 at +£1.5bn year-over-year, with fourth quarter net interest income projected at £3.54bn.

Bank of England data for November shows healthy loan growth across the UK banking sector, with mortgages improving at +3.3% year-over-year, consumer credit strong at +8.1%, and corporate loans growing at +6.3%.

Household deposits increased by £21.1bn in the fourth quarter to date, supporting the positive outlook for UK banks in 2026.