FTSE 100 banks £16bn payday to face economic reality check
Provisions for sour loans threaten to take a bite out of profit growth as Barclays kicks off FTSE 100 banks earnings season next week whilst economic tensions loom over the wider financial industry.
UK banks will give a snapshot of the gathering tensions in the economy next week as the nation’s top lenders update the City on their first quarter financial results
Barclays will kick off results season on Tuesday. It will be followed by Lloyds a day later, Standard Chartered on Thursday and then Natwest, which rounds off the week on Friday. Europe’s biggest lender HSBC will follow up with its update the week after, on 5 May.
The pre-tax profit haul at the FTSE 100’s Big Five banks is expected to be just shy of £16bn.
If achieved, this will pull marginally ahead of the £15.2bn secured in the first three months of 2025. Though it will undershoot the near £17bn from 2024 and £18bn in 2023, bounty which was boosted by high interest rates.
Beyond the headline numbers, attention in the City will focus on recent market volatility and how it is shaping the wider outlook for 2026. The interest rate path is expected to look more favourable than it did just three months ago, following the US and Israel’s war with Iran sending inflationary ripples through the global economy.
“Net interest income is expected to hold up well, thanks to an almost total halt in interest rate cuts around the world,” Russ Mould, investment director at AJ Bell, told Morning Wire.
Banks go for 2022 deja vu
But some of the enthusiasm for an interest rate-driven revenue bump is expected to be offset by higher provisioning for loan losses amid the economic uncertainty.
“Higher impairment charges could limit profit growth,” Mould said.
In the first quarter of 2022, HSBC recorded an impairment charge of $642m (£476m), which led to profit for the period shrinking 25 per cent to $3.4bn. Equally, Lloyds profit was dragged down to £1.6bn, from £1.9bn in 2021, after a £117m was set aside to help buffer against bad loans.
This provisioning came following Russia’s invasion of Ukraine that led to a seven per cent rise in inflation.
“It would be no surprise to see [banks] cite geopolitical uncertainty and the absence of expected central bank interest rate cuts if loan impairment rates do go up,” Mould added.
Analysts are pencilling loan provisions to come in at £2.6bn across the quintet. That would mark the highest first-quarter charge since the beginning of 2020, where the world was dealing with the global shock of the Covid-19 pandemic.
Barclays’ investment banking boom
Beyond the war-related jitters, activity at investment banking arms are expected to report a bump higher in activity.
Over on Wall Street, top banks gave markets their first quarter update at the beginning of the month. US lenders toasted a $50bn haul after stock market divisions boomed on the market volatility.
The six top US banks – Morgan Stanley, Goldman Sachs, Citigroup, Bank of America, Wells Fargo and JP Morgan – raked in $47.4bn in pre-tax profit.
Goldman Sachs’ stock division reaped $5.3bn (£3.9bn) in revenue for the first quarter of the year, surpassing the previous record of $4.3bn secured by the bank in the final quarter of 2025.
A boom in investment banking was trailed ahead of time, with Citigroup’s Jane Fraser – the only British chief on Wall Street – describing corporate activity as “very strong at the moment”.
Mould said: “Investment banking operations could have a good first quarter, if the results from their US rivals were a reliable guard”.
Barclays’ mammoth market division means it is best placed to benefit in this regard.
Analysis from Jefferies said the bank’s income from high-speed market volatility trading is 3.5 times larger than the income from traditional investment banking, suggesting whilst others could be swept up in turmoil, Barclays may be able to cash in on it.
The division is forecast to generate £3.9bn in net income, broadly in line with the amount secured the year prior.
In the first three months of 2025, the investment bank’s £2.7bn in pre-tax profit contributed 67 per cent of group-level, overall profit.
Barclays transformed its investment banking business in 2008, when it swooped for the North American operations of Lehman Brothers. The famous US bank had crashed due to its exposure to bad investments in sub-prime mortgages via complex derivative products which became emblematic of the global financial crisis.
Its group chief executive, CS Venkatakrishnan – known as Venkat – intends to reduce the group’s reliance on its investment bank by growing the retail banking and wealth management parts of the businesses.
City analysts will be on watch for signs of success in that regard as they work through the first of a series of set-piece earnings reports due from early next week.