Jump to content

​​​​UK bank share prices under pressure ahead of earnings

Recommended Posts

UK banks have had a tough six months, and despite good earnings from their US counterparts the outlook remains difficult thanks to pressure on borrowers and the likely end of the Bank of England’s rate hikes.

original-size.webpSource: Bloomberg

 Chris Beauchamp | Chief Market Analyst, London | Publication date: Monday 23 October 2023 13:21

UK banks face tough outlook

This week marks the beginning of UK bank earnings season, with Barclays, Lloyds, and NatWest all set to report their financial results. However, it seems that US banks have outperformed their UK counterparts, as the weaker state of the UK economy makes it less likely for UK banks to achieve a similar level of success. While NatWest, Lloyds, and HSBC are expected to announce a rise in profits, Barclays is anticipated to experience a decline in earnings. This divergence in performance can be attributed to various factors, including the impact of higher borrowing costs on loan demand. The recent weakness in mortgage approvals has certainly played a role in dampening loan demand, affecting the overall profitability of banks.

Higher rates a mixed blessing

On one hand, higher interest rates have been beneficial for bank earnings. However, they have also placed pressure on borrowers, leading to an increase in impairments and provisions for bad loans. This dual effect of higher interest rates highlights the delicate balance that banks must navigate in order to maintain profitability while managing the risks associated with lending.

Rates unlikely to keep rising

Looking ahead, it is worth considering the future trajectory of interest rates. The Bank of England is likely approaching the end of its hiking cycle, which raises the question of where rates will go from here. This uncertainty adds another layer of complexity for banks, as they must anticipate and adapt to potential changes in the interest rate environment.

In summary, UK bank earnings are expected to reflect the challenges posed by the weaker state of the economy and higher borrowing costs. While some banks may report a rise in profits, others may face a decline. The impact of higher interest rates on borrowers and the future direction of rates further contribute to the complexity of the banking landscape.

Lloyds share price – technical analysis

Lloyds has seen a steady decline since March. Lower highs in April, July and September have maintained the bearish view, though 40p has been support since June. Recent gains were capped at 44p, so a close above this level is needed to provide a short-term bullish view, but it will still face potential resistance around the July and September highs.

original-size.webpSource: ProRealTime

Barclays share price – technical analysis

After the huge losses of February and March, the price rebounded, but gains were contained below 165p. Since June, buyers have stepped in around 143p to prevent any near-term downside, with sharp rallies following dips into this level. Bulls will be watching for a possible repeat performance, though trendline resistance from the September highs could come into play to cap any near-term upside.

original-size.webpSource: ProRealTime



This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
    • Total Posts
    • Total Members
    • Most Online
      10/06/21 10:53

    Newest Member
    Joined 04/12/23 11:30
  • Posts

    • If you ever need advice or assistance in navigating the complexities of the mortgage market, I usually consult with Mortgage Broker Chelmsford for all my financial matters. They've been a great resource for me, and I highly recommend reaching out to experts like them for guidance.Let's hope the extension of the scheme provides some relief to first-time buyers and helps stimulate the housing market.
    • Going by what i see on the weekly TF, BTC is heading to $46-48k major price zone level. If it breaks and holds above this zone, then $51-52k is the next minor zone, since its a minor zone, BTC might rally at this zone before deciding to go all the way up or coming back down. Though, I am still mindful of the bearish flag pattern, so there is tendency that BTC could start dumping from any of this zones yah. Lets see how it plays out yah.
    • Interesting update. I also withdrew my funds from Binance and deposited it on Bitget and Bybit exchange just to be safe. Though, personally, I believe Binance will bounce back from this set back. It is no news that both CZ and Binance has contributed immense to the growth of the crypto space and continues to do so.. More so, their case is a different from FTX as you clearly stated. I am optimistic Binance is going no where, not any time soon yah.
  • Create New...