Major British banks, including HSBC and NatWest, are poised to elevate their key profitability targets following the lead of their European counterparts. These revisions are anticipated with the upcoming release of their annual earnings reports in the coming weeks. HSBC is a global financial services company, offering a wide range of banking and wealth management solutions. NatWest Group is a British banking and insurance holding company, providing a range of retail and commercial banking services.
Specifically, HSBC is projected to increase its return on tangible equity (ROTE) outlook, a crucial metric for profitability, exceeding its current guidance of ‘mid teens or better’. Similarly, NatWest is expected to revise its 2027 guidance from 15% to potentially as high as 17%. Barclays, which previously indicated a ROTE expectation of 12% or above for 2026, is also likely to raise its targets, according to sources familiar with the lender. Analysts suggest that Barclays and HSBC could increase their targets by as much as 200 basis points when outlining guidance for the coming years.
These anticipated increases in profitability targets reflect the banks’ confidence in sustaining benefits from favourable interest rate conditions and consistent growth in loan and fee income. Peter Rothwell, head of banking at KPMG UK, noted that UK banks have demonstrated earnings resilience, supported by higher interest rates, robust credit quality, and effective cost control. Lloyds Banking Group could also lift its targets this year, analysts at Jefferies said this month. They expect ROTE to rise to as much as 18.5% by 2028 from this year’s goal of more than 15%.
The banking sector across Europe has witnessed a resurgence in stock performance, more than doubling since early 2024 and increasing by 60% in the past year, significantly outperforming U.S. banks. Spanish banks like Santander and BBVA have also experienced income growth while managing costs effectively, leading to expectations of improved targets. Germany’s Deutsche Bank set a new ROTE target for 2028 of greater than 13%, up from its 2025 target of 10%. Volatile markets and increased corporate deal activity are expected to further boost investment bank earnings, particularly for firms like Deutsche, Barclays, and UBS.
