Large UK banks are sustaining earnings momentum at the start of 2026 even as they set aside more money for potential credit losses. The latest quarter also shows broadly stable asset quality and continued capital strength across HSBC, Barclays, Lloyds Banking Group and NatWest Group.
Highlights
- HSBC, Barclays, Lloyds, and NatWest posted solid Q1 2026 profitability despite higher provisions and operating headwinds, meeting Morningstar DBRS expectations.
- Asset quality at major UK banks remains broadly stable as of Q1 2026, even as lenders increase provisioning to prepare for ongoing macroeconomic and geopolitical risks.
- Capital positions, including common equity tier 1 ratios, remain strong but edged down slightly from end-2025, leaving solid buffers amid potential for further credit cost increases.
Morningstar DBRS assessment of first-quarter earnings
As reported by Morningstar DBRS, the biggest UK banks continue to deliver solid profitability in the first quarter of 2026 despite higher provisions and broader operating headwinds.The commentary covers HSBC Holdings plc, Barclays PLC, Lloyds Banking Group plc and NatWest Group plc. Morningstar DBRS says the results are broadly in line with its expectations, with resilient performance supported by a risk profile that remains stable across the group.
Vitaline Yeterian, Senior Vice President and Sector Lead for European Financial Institution Ratings at Morningstar DBRS, says the banks post solid results despite headwinds. She adds that the main challenges for the rest of the year continue to include heightened macroeconomic and geopolitical uncertainty, as well as the possibility of a further increase in provisions.
Capital strength and sector outlook
The first-quarter results also indicate that asset quality remains broadly stable at the large UK banks, reinforcing the view that credit conditions are holding up even as lenders take a more cautious stance on provisioning.Capital positions remain strong as expected, although common equity tier 1 ratios edge down slightly from the end of 2025. That combination suggests the sector enters the rest of 2026 with solid buffers, while still facing pressure from an uncertain economic backdrop and the risk of additional credit costs.
In our earlier article, we covered Barclays’ €1.75 billion issuance of euro-denominated fixed rate senior callable notes, a move aimed at diversifying its funding base and reinforcing long-term capital strength. We also noted that the stock was showing mixed technical momentum, with a near-term trading range shaped by key support and resistance levels. Overall, the piece highlighted how Barclays’ funding actions could support resilience even amid cautious market conditions.
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