A different perspective and different bank. I’m planning to reduce my NWG holding tomorrow as it’s going ex-div on Thurs. i currently hold a hugely overweight £25k and will reduce to £10k at which point it’s included in my rebalancing pool instead of it just sitting there mocking! It’s actually done ok, especially recently, just a few % down so have basically got a few years’ yield to show for my overconfidence and patriotism!

I will be doing exactly the same on 24th April to halve my LGEN holding to £15k.

A bit silly investing so much in single shares really, steady as these two are / should be.

Lloyds, Barclays, NatWest: analysts positive ahead of UK clearing banks results this week
Published: 16:17 22 Apr 2024 BST
Written by: Oliver Haill


The UK's three largest clearing banks – Lloyds, Barclays and NatWest – report first-quarter results this week, with analysts bullish about the sector as they see low valuations and the prospect of more bumper capital returns in the next few years.

Peel Hunt was the latest to join the positive chorus, with analysts arguing that "valuations are low, profitability is already established at levels that should justify higher valuations, and that many of the factors that are currently depressing valuations (the weak UK economy, poor performance of the UK equity market...) are likely to abate in the medium term".

A total of nearly £30 billion of capital returns for the trio is forecast over the coming three years, equal to c.30% of their current combined market caps.

Let's look at what to expect this week.

Wednesday: Lloyds

Lloyds Banking Group PLC (LSE:LLOY) is the least favoured by Peel Hunt (a 'hold' recommendation and target price of 55p versus the last close at around 51p) as analysts see less near-term share price upside due to its starting point premium valuation.

Motor finance provisions are one of the big question marks hanging over these quarterlies, with Lloyds having so far announced a £450 million provision for the potential impact of the Financial Conduct Authority's review of historical motor finance commissions.

Full FCA's findings are due by 24 September 2024 and UBS, which recently tipped the black horse bank with a 'buy' rating and 58p target, said it does not expect any more motor finance provisions with this set of numbers.

The City analyst consensus forecast for underlying profit is £1.73 billion, down from £2.22 billion a year earlier but close to the £1.75 billion seen in the fourth quarter of last year. Statutory PBT of £1.66 billion is expected, down from £2.26 billion YoY and £1.78 QoQ.

Net interest margin (NIM) is expected to have narrowed further to 2.93% from 2.98% in Q4 and 3.22% in Q1 of last year, in line with guidance for at least 2.90% for the year, with sequential growth later in the year.

A CET1 capital ratio of 13.9% is predicted, down from 13.7% three months earlier and 14.1% a year earlier.

"We think if UK domestic banks can produce noticeable income growth in 2025 they will stand out vs Eurozone peers in faster pass through markets in particular," UBS said.

Thursday: Barclays

Next comes Barclays PLC (LSE:BARC), which is tipped as a 'buy' by Peel Hunt and UBS with targets at 245p and 240p.

The Peel team like Barclays as "banks' P/TNAVs are correlated with ROTE," in other words, banks with higher profitability generally have better stock valuations, with Barclays' return on capital "should increase in coming years as more capital is allocated to higher-returning activities".

Consensus ROTE is 11.7%, up from 8.8% last year. pre-impairment profit is £2.73 billion with a £539 million impairment, and a statutory PBT of £2.2 billion. CET1 is seen rising to 13.6$ from 13.3%.

Barclays has guided to £3 billion in dividends and buybacks this year, the same as last year and around 11% of its market cap.

But UBS thinks this quarter could see a "smaller 2Q-announced buyback" and more of its capital returns loaded in the back end of the year due to higher seasonal deployment of capital in the investment bank and the recent US card acquisition.

Barclays' investment bank will be in focus too, as US rivals such as Citi and JPMorgan reported sales and trading down 8% and 5% on last year and advisory up 32% and 27%.

Friday: NatWest

NatWest Group PLC (LSE:NWG) occupies its familiar Friday spot and other bank analysts also having a positive Friday feeling about the lender.

Those at Barclays recently forecast that NatWest will beat first-quarter earnings guidance and post an upward revision to its full-year guidance due to markets repricing rate expectations higher in recent weeks due to stickier inflationary indicators (although markets are still unsure about a possible summer rate cut).

Peel Hunt is also bullish, doling out another 'buy' and target price of 330p, as analysts see scope for the group to recover lost market share in core banking products like mortgages and credit cards back to pre-2008 levels, now that internal restructuring is complete.

The end of the UK government holding should also be positive for the shares over the next two years.

Consensus is for profit from continuing operations of £1.26 billion, versus £0.91 billion in Q4, mainly helped by lower tax charges plus a little less impairments. NIM is expected to be little changed from the 1.99% at the end of last year, likewise CET1 of 13.4%.

Capital returns will also be in focus, with lower impairments possible one of the keys to this, said UBS.

UK banks are now finally fundamentally fixed. Balance sheets are extremely strong. Underpinned by tough regulation. Pre the boom days leading up the GFC. Banks were regarded as staid and boring investments. A return to them being value stocks again, when the price is right.

Lloyds SP reaching the dizzying heights of 53p. I’m expecting street parties.


Lloyds Banking Group's profits plunged by 28% in early 2024 as competition grew for mortgages and deposits.

The bank posted pre-tax profits of £1.6bn between January and March, down from £2.3bn last year.
Lloyds said its margins had been hit "mainly within UK mortgages" amid heightened competition between lenders to offer squeezed buyers better deals.

The UK's biggest lender also made less from loans to businesses, but more from credit cards and car finance.

The group, which owns Halifax and Bank of Scotland, said in the three months to the end of March that its net interest income, which is the difference between the money it generates from loans and pays out for deposits, fell 10% to £3.2bn ($4bn).

The fall was expected as more people moved their cash into savings accounts with higher returns and mortgage rates eased because of the competition stepping up among lenders.

"The company has seen competition in the mortgage market bring down its returns and savers move deposits into higher interest accounts - meaning it is paying out more to customers, " said Russ Mould, investment director at AJ Bell.

Like other UK banks, Lloyds' profits were boosted by the increase in interest rates over the past couple of years, which have allowed lenders to charge more on loans.

For the whole of 2023, Lloyds' I pre-tax profits jumped to £7.5bn, which was higher than expected and up 57% on 2022.

Borrowing costs have risen as the Bank of England has increased its base interest rate in a bid to bring down inflation - which measures price rises over time.

But Mr Mould suggested that "Lloyds' brief moment in the sun, when rates moved sharply higher and it was able to generate higher margins, seems to have come to an end".

Cue huge market overreaction as usual.
I’m no longer involved personally but an interested onlooker hoping the SP doesn’t zoom after I sold them recently (!)

NatWest Group posted a decline in interim profits as net interest margins fell and costs rose.

During the first half of its fiscal year, NatWest Group posted a decline in operating profits before tax of 15.6% to reach £3.03bn.

Net interest margins fell by 16 basis points to 2.07%, but improved by 5bp in the second quarter to 2.1%.

In parallel, the cost-to-income ratio worsened from 49.3% to 55.5% during the half.

Returns on tangible equity declined from 18.2% one year before to 16.4%.

Levels of default remained stable and at low levels across the portfolio, according to the lender.

The loan impairment rate was down by nine basis points at the half-year stage.

Management said that it now saw full-year income, excluding notable items, of approximately £14bn and expected the lender's return on tangible equity would increase to over 14%.

The interim dividend payout was hiked by 9% to 6p.