British banks to join European rivals in hiking profit targets

Britain’s largest banks are preparing to increase their profit targets when they publish annual results in the coming weeks, aligning themselves with a broader trend already seen across Europe. Institutions such as HSBC and NatWest are expected to signal higher profitability expectations, reflecting confidence that current market conditions can sustain strong returns.

HSBC is anticipated to lift its return on tangible equity outlook beyond its current guidance of mid-teens or higher. NatWest, meanwhile, could revise its 2027 profitability target upward, potentially moving from around 15% to as much as 17%. Barclays is also expected to follow a similar path, after previously indicating a return on tangible equity of at least 12% by 2026. Analysts believe that both Barclays and HSBC could increase their targets by up to 200 basis points when they outline their medium-term plans.

Across continental Europe, several banks have already raised their profit goals, suggesting growing confidence that higher margins will persist over the next few years. This optimism is driven by relatively stable interest rate conditions, solid loan demand, and continued growth in fee-based income. However, raising expectations also carries risks, as any economic slowdown could lead to investor disappointment if targets are missed.

Lloyds Banking Group may also revise its ambitions, with some forecasts pointing to a return on tangible equity of up to 18.5% by 2028, compared with its current goal of just over 15%. Industry observers note that UK banks have benefited from earnings resilience lasting longer than initially expected, supported by higher interest rates, strong credit quality, and disciplined cost control.

European bank shares have staged a remarkable recovery after years of weak performance following the financial crisis. Banking stocks across the region have more than doubled since early 2024 and are up around 60% over the past year, significantly outperforming their US counterparts.

Several southern European lenders have contributed to this momentum. Spanish banks have grown revenues while keeping expenses under control, prompting expectations of further target upgrades. Some forecasts suggest that profitability at leading Spanish institutions could rise steadily over the coming years, reaching levels well above recent averages.

In Germany, Deutsche Bank has already set a higher profitability goal for 2028 and is expected to confirm strong results that could mark its best performance in nearly two decades. Investment banking divisions across Europe may also benefit from volatile markets and increased deal activity, following a strong reporting season among US banks.

Not all lenders are expected to join the trend. Some French banks may face pressure from higher costs and intense domestic competition, which could limit their ability to raise profit targets in the near term.

Overall, the renewed confidence among European and UK banks highlights a sector that is finally emerging from years of underperformance, though higher ambitions will test whether current favorable conditions can truly be sustained.

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