UK banks set to raise profit goals like their European counterparts, sources indicate

UK Banks Look to Raise Profit Targets Amid Positive Outlook

LONDON, Jan. 26 – Major banks in the UK, notably HSBC and NatWest, are planning to elevate their profit targets, according to insiders. This development follows a trend among their European counterparts, who have started to increase their expectations after favorable financial results.

Sources indicate that HSBC is likely to boost its return on tangible equity (ROTE) from its existing target of “mid-teens or above.” Meanwhile, NatWest appears set to raise its expectations for 2027 from 15% to potentially 17%.

Barclays is also expected to adjust its ROTE target, previously set at over 12% for 2026, suggesting significant upward revisions. Analysts believe both Barclays and HSBC could increase their targets by as much as 200 basis points when they announce their earnings in mid-February.

Encouragingly, many banks in continental Europe have already adjusted their profit forecasts, suggesting confidence in sustained margin growth. This optimism is primarily driven by favorable interest rate conditions and continued growth in loan and fee income, although there are inherent risks; if economic conditions deteriorate, investor sentiment might waver.

In today’s climate, Lloyds Banking Group is also making headlines, as recent reports lifted their profitability expectations, with potential ROTE hitting 18.5% by 2028. This figure represents a substantial increase from the current year’s projection of more than 15%.

Industry experts note that the banking sector in the UK is experiencing a longer-than-anticipated recovery. Factors contributing to this positive trend include rising interest rates, strong credit quality, and effective cost management. However, investment banks like Deutsche Bank and Barclays, along with UBS, could see a boost in earnings as a result of recent price volatility and corporate activity.

Looking ahead, analysts expect various European banks, including Banco Santander and BBVA, to follow suit in increasing their profit targets, capitalizing on a recovery in earnings and positive market conditions.

As banks gear up for earnings season, the general sentiment is optimistic; the main concern remains whether economic pressures might overshadow these targets.