HSBC and Barclays shareholders eye returns as tariffs cloud banks’ reports
The FTSE 100’s ‘Big Five’ banks are gearing up for first-quarter results season – and shareholders will be eyeing how lenders set the tone for the year ahead.
HSBC will kick off reports on Tuesday, followed by Barclays on Wednesday and Lloyds on Thursday. Natwest and Standard Chartered will round off the results week on Friday.
Lenders’ first-quarter accounts will narrowly skirt President Donald Trump’s tariff onslaught, but the changing geopolitical climate is expected to feature in forward looking guidance.
The FTSE 350 Bank Index shed nearly a thousand points in the week Trump slapped levies on all the US’ trading partners.
Russ Mould, investment director at AJ Bell, told Morning Wire: “This may mean that analysts and investors are more interested in any outlook statements for the second quarter and beyond rather than the results for the first three months of 2025, providing that management teams feel able to provide any guidance.”
Banks’ risk appetite will be a hot topic, not just for the shareholders but for an indication of wider economic performance.
If lenders retreat on risk activity, even at a cost to profits, alarm bells will be raised on the economy’s health.
Peter Rothwell, head of banking at KPMG UK, told Morning Wire: “We expect banks to seek to reassure investors that they are closely monitoring the situation with a view to both managing risk but also capitalising on opportunities for growth.”
Mould added: “If anything, the big lenders may be keenest to offer reassurance about the financial solidity and preparedness for any macroeconomic bumps that come their way, even if it is probably too early in the year for management to change the assumptions that underpins their guidance for 2025.”
FTSE banks to follow in Wall Street’s footsteps
Despite the eyes on the future, investors will be mulling changes to net interest after the Bank of England whittled rates down from a post-financial crisis high of 5.25 per cent to 4.5 per cent.
Mould said the “relatively slow pace of central bank rate cuts” would favour trends in net interest income.
He added the growth in loan books would likely outpace deposits.
After Wall Street’s banking giants cashed in on the market volatility in their first quarter postings, analysts expect UK lenders to follow suit.
JP Morgan comfortably topped first-quarter revenue estimates after a 48 per cent surge in takings from equities trading.
Mould said: “Investment banking operations will have looked to make hay from the volatility seen across a range of asset classes, and this could help Barclays in particular, even if IPO and M&A activity remain relatively subdued.”
Barclays investment bank raked in £11.85bn in 2024 income, making it a key facet of the lender’s operations.
Motor finance ruling awaits
For Lloyds, the motor finance ruling lurks in the distance.
The lender has set aside £1.2bn in provisions for the car mis-selling scandal.
A ruling from the Supreme Court into whether it was unlawful for banks to pay a commission to a car dealer without the customer’s informed consent is expected in the early summer.
Mould said: “Restructuring and conduct costs have been modest of late and there is no reason for that to change, at least until there is more visibility on how the UK Supreme Court may decide on the appeal from two lenders regarding the car financing market.”
The Financial Conduct Authority (FCA) will provide an industry-wide redress scheme within six weeks, should an adverse judgement be handed to the lenders.
Barclays and Spanish-based Santander, which will post results on Wednesday, are also impacted by the scandal.
Barclays has set aside £90m, whilst Santander has reserved £295m.
Analysts have pencilled in over £30bn in cash returns from the ‘Big Five’ in 2025 between a nearly even split combination of dividends and buybacks.
Mould said “It will be interesting to see if management teams see fit to recalibrate expectations for buybacks in light of the cloudier macroeconomic outlook.”