UK bank shares half-year results preview
The country’s biggest lenders are putting the finishing touches to upcoming first-half results, but what will they include? City writer Graeme Evans looks at what investors can expect.
9th July 2025 13:46
by Graeme Evans from interactive investor
The top pick status of Lloyds Banking Group (LSE:LLOY) has been reiterated by a leading City firm after it said the lender was the best way for investors to play strong UK market dynamics.
In its preview of the industry’s half-year results season, Morgan Stanley backed Lloyds shares with a price target of 95p. That compares with today’s 75.6p following a rise of 37% this year.
- Invest with ii: Open a Stocks & Shares ISA | What is a Stocks & Shares ISA? | ISA Offers & Cashback
The investment bank also has an Overweight stance on Barclays (LSE:BARC) and expects further solid progress by NatWest Group (LSE:NWG), which is reflected in a new higher price target of 580p.
Lloyds is due to present half-year figures on Thursday 24 July, followed by NatWest on 25 July, Barclays on Tuesday 29 July, HSBC Holdings (LSE:HSBA) on 30 July and Standard Chartered (LSE:STAN) on 31 July.
Morgan Stanley estimates that overall UK net interest income will grow by 2% or more on a quarter-on-quarter basis, with its estimate for aggregate growth of 8% across 2025 and 2026 the highest in Europe after France.
Believing that concerns around the ISA season and potential deterioration in the deposit mix have been overdone, the bank highlighted recent figures showing an acceleration in mortgage approvals and favourable trends in deposit pricing.
The bank said: “All in, we see UK net interest income (NII) as well supported. We see Lloyds, with accelerating NII growth, as the best way to play it.”
- Share Sleuth: the no-brainer trade to reduce my cash pile
- Stockwatch: an income stock about to generate capital growth?
Lloyds reported 3% year-on-year growth in net interest income to £3.29 billion in the first quarter. This was supported by an improved banking net interest margin of 3.03% as it benefited from strong deposit volumes and a growing structural hedge contribution.
Morgan Stanley expects 2.1% quarter-on-quarter growth in net interest income in this month’s update, accompanied by a 3.06% net interest margin and healthy volume growth. Its forecasts are above management's £13.5 billion NII guidance for the full year.
With a total yield of 9%, the bank sees the Lloyds interim dividend increasing by 10% to 1.17p a share.
At about the same time as the results, the Supreme Court is expected to deliver its judgment in relation to an appeal on motor finance commission arrangements.
Morgan Stanley believes this could serve as a positive catalyst as it assumes the outcome is unlikely to be more severe than the current market consensus.
At NatWest, the bank expects net interest income to continue to show good growth after forecasting a 2.2% quarter-on-quarter increase.
It said: “If there is a risk to revenues, it would more likely be in Natwest Markets, where we will be looking at how the business has managed the volatility in the quarter.
“However, our revenues for the full year remain in line with consensus and above management's guidance of "high-end of £15.2-15.7 billion”.
- ii Community: members vote on cutting cash ISA limit
- Sign up to our free newsletter for investment ideas, latest news and award-winning analysis
It remains Equal-weight on the stock, which has risen by more than 150% since October 2023. However, the price target is up from 550p to 580p to reflect earnings upgrades on the back of more favourable net interest income trends than expected for 2026-27.
At Barclays, the bank believes a recovery in investment banking fees should more than offset US dollar headwinds. It has an Overweight recommendation and 385p price target on the stock, which is up 26% this year following a strong post-tariffs recovery.
The bank added: “We do not expect any deterioration in US asset quality, and we factor in a £1 billion share buyback announcement.”
For the Asia-focused banks HSBC and Standard Chartered, Morgan Stanley expects a solid second-quarter performance as trends in wealth revenues remain robust and underpinned by strong activity levels in Hong Kong.
Continued demand for currency and interest rate hedging should have helped sustain strong capital markets revenues, whereas net interest income is expected to be under some pressure.
Both banks are set to continue with share buybacks in the second quarter, with $2.5 billion (£1.8 billion) forecast in the case of HSBC and $1.5 billion for Standard Chartered. The bank has a target price of 846p on HSBC, with Standard Chartered seen at 1,168p.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.