HSBC, NatWest among lenders set to raise profit targets-sources
Continental banks also eye higher targets, but hikes risk disappointing investors
European lenders report earnings this month amid continued share price rally
By Lawrence White
LONDON, Jan 26 (Reuters) - Britain’s biggest banks including HSBC (HSBA.L) and NatWest (NWG.L) are set to follow their European rivals and lift their key profit targets when they report annual earnings in the coming weeks, people close to the matter said. HSBC is expected to raise its return on tangible equity (ROTE) outlook - a key measure of profitability - above current guidance of “mid teens or better”, while NatWest is likely to upgrade its guidance for 2027, currently at 15%, to as much as 17%, two people said. Barclays (BARC.L) , which in October said it expected an ROTE of 12% or above in 2026, should also lift its targets, a third source familiar with the lender said.
Analysts have also said they believe Barclays and HSBC can raise their targets by as much as 200 basis points when they set out guidance for the coming years. They report their earnings on February 10 and February 25, respectively.
In continental Europe, many banks have already lifted their profit goals, signalling confidence higher margins will last for years.
Increased profitability targets show banks expect to keep benefiting from benign interest rate conditions and continued loan and fee income growth, although aiming higher is not without risks and can leave investors disappointed if economies stutter.
Lloyds Banking Group (LLOY.L) could also lift its targets this year, aiming for ROTE to rise to as much as 18.5% by 2028 from this year’s goal of more than 15%, analysts at Jefferies said this month.
The banks all declined to comment.
“UK banks have benefited from earnings resilience lasting longer than initially expected, supported by higher interest rates, robust credit quality and tighter cost control,” said Peter Rothwell, head of banking at KPMG UK. Lloyds and Deutsche Bank (DBKGn.DE) report full-year earnings on Thursday, kicking off the European bank reporting season following a bumper set of numbers on Wall Street.
<h3>BANKS ACROSS EUROPE PUSHING PROFITS HIGHER</h3>
After years of poor profitability and share performance following the financial crisis, European banking stocks (.SX7P) have more than doubled since early 2024 and risen 60% in the past year - far outpacing U.S. banks.
Among European rivals, Spanish banks Santander (SAN.MC) and BBVA (BBVA.MC) have grown income while keeping costs under control, raising expectations for improved targets.
JPMorgan expects BBVA to have delivered an around 20% ROTE in 2025, broadly in line with 2024, with profitability rising to 22% in 2026 and reaching 26% by 2028.
Santander could target a ROTE by 2028 of around 19–20%, up from 16.1% as of September, Barclays analysts said. Germany’s Deutsche Bank in November set a new ROTE target for 2028 of greater than 13%, up from its 2025 target of 10%.
Analysts expect Deutsche to confirm it met the 2025 target, alongside figures that could show its biggest profit since 2007. Volatile markets and a flurry of corporate deals should also lift investment bank earnings, buoying the likes of Deutsche, Barclays and UBS (UBSG.S) , after most Wall Street banks reported rising revenues and a bullish outlook.
France’s Societe Generale (SOGN.PA) , BNP Paribas (BNPP.PA) and Credit Agricole (CAGR.PA) may buck the trend as higher costs and domestic competition weigh on profits, analysts said.
Catching up: Europe’s banks outperform US rivals after years of lagging
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British banks, including HSBC and NatWest, are expected to raise their profit targets in line with European rivals, as they prepare to report annual earnings. HSBC may increase its return on tangible equity (ROTE) outlook above mid-teens, while NatWest could raise its 2027 guidance from 15% to 17%. Barclays is also anticipated to lift its targets. Analysts suggest that UK banks have benefited from resilient earnings due to higher interest rates and strong credit quality, although raising targets carries risks of disappointing investors if economic conditions falter.

- Britain's major banks, including HSBC and NatWest, are expected to raise their profit targets, aligning with a trend among European lenders.  
- Analysts suggest HSBC may increase its return on tangible equity outlook, while NatWest might adjust its 2027 goal to 17%.  
- Despite the positive outlook, raising targets presents risks of disappointing investors if economic performance declines.

British banks to join European rivals in hiking profit targets, sources say