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16 July 2026
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Shares Magazine
The major UK banks are schedule to report first-half earnings between the back end of July and early August 2026.
Heading into the numbers, bank shares have continued to outperform the FTSE 100 benchmark with HSBC shares up by around a fifth and Lloyds up around 12% while NatWest and Barclays have lagged.
Interest rate expectations, which are critical for bank’s net interest margins have been on rollercoaster ride, with expected rate cuts giving way to hikes after the outbreak of the US-Iran war led to an inflation scare.
Current expectations are pricing in a quarter of a percentage point hike for November, which would bring official rates to 4% and there is a 50/50 chance of a further hike in December.
The higher for longer rate environment means banks continue to enjoy solid returns of their loan portfolios, while mortgage pricing has stablised since March.
Structural interest rate hedges (where banks look to smooth income) continue to act as a tailwind for the sector as older hedges roll over at higher yields.
For example, in its first-quarter results on 29 April, Lloyds said year-on-year net interest income growth of 8% was driven by ‘strong’ structural hedge income.
Bank of England relaxes leverage rules
A focal point of interest for investors will be possible changes to capital allocation policies following the Bank of England’s plan to relax leverage rules, freeing up hundreds of billions in balance sheet flexibility.
Shore Capital’s Gary Greenwood believes that while the BoE’s proposal could in theory support a bigger balance sheet on the same amount of regulatory capital, he doesn’t expect a large change in lending appetites.
Over the past couple of years banks have used their strong balance sheet to return capital to shareholders via dividends and share buybacks.
Lloyds is in the middle of a £1.75 billion share buyback, and NatWest is returning £750 million, while Barclays has already deployed a £1.5 billion program in 2026 as part of its commitment to return more than £15 billion to shareholders between 2026 and 2028.
NatWest’s £2.7 billion acquisition of wealth manager Evelyn Partners has drawn some negative attention, in part because it reduced the bank’s minimum regulatory capital ratio.
Alongside the current £750 million buyback, management paused the next programme until for first half of 2027 as the bank focuses on integration of Evelyn Partners.
Analysts anticipate HSBC could resume share buybacks in the second half of 2026 after pausing them to absorb the rest of its Hong Kong subsidiary, Hang Seng bank in 2025.
The bank has indicated a minimum Tier 1 Capital ratio of 14% as the trigger for a resumption of share buybacks, making an announcement at the half year results feasible.
Tom Sieber: Content Editor
Tom Sieber is AJ Bell's Content Editor. He was previously the Editor of Shares Magazine. He has been with the business since 2012.
Tom is a regular contributor to the AJ Bell Money & Markets...
