Lloyds and NatWest share prices at nine-year highs ahead of Q1 results
Major UK lenders Lloyds and NatWest are forecasting lower profits as high interest rates start to come down and competition heats up in the mortgage market.
Top UK banks are poised to report lower profits as the initial benefits of higher mortgage rates begin to fade. This shift reflects a changing financial landscape as banks navigate evolving market conditions and consumer behaviour.
Despite elevated borrowing costs continuing to affect UK households, the banking sector is experiencing a transition period that affects their financial performance.
Lloyds and NatWest to report figures
Lloyds Banking Group, the UK's largest mortgage lender, is expected to report a pre-tax profit of £3.2 billion for the first half of the year, marking a significant 20% decline from the £3.9 billion profit reported in the same period last year. This retreat from the highs of 2023 is due to intensified competition in the mortgage and savings markets.
NatWest is projected to report an operating pre-tax profit of £2.6 billion for the six months to June. This figure represents a substantial drop from the £3.6 billion recorded in the same period last year. Despite this decline, NatWest had previously observed an improvement in consumer confidence and reported an increase in both savings and current account balances since the end of 2023.
Market trends and consumer behaviour
The UK banking sector is currently experiencing several notable trends. Elevated borrowing costs continue to affect UK households, potentially leading to subdued lending levels as potential buyers await lower borrowing costs. UK interest rates have remained steady at 5.25% since August 2023, contributing to this cautious market environment.
Interestingly, the trend of increased savings that was prominent in the previous year may be slowing down. Fewer people are transferring money into long-term savings accounts, following a surge in such transfers last year. This shift in consumer behaviour adds another layer of complexity to the evolving financial landscape that UK banks must navigate.
Lloyds share price – technical analysis
The price recently hit the 59p level, last seen in June 2015. The ascent over the past six months has been rapid, and may well be due for some short-term weakness.
For the moment, however, the price is holding steady above the rising 50-day simple moving average (SMA), currently 56.19p. Weakness in June was met by buying at the 50-day SMA, so this may continue to provide support even in the event of a trendline break.
NatWest share price – technical analysis
It has been a similarly impressive run for NatWest, which surpassed the 2023 highs in early May and has since gone on to fresh nine-year highs.
As with Lloyds, dips have been short-lived and quickly bought, with the price holding above the 50-day SMA throughout June and into July.
Short-term weakness might see the price test rising trendline support from mid-June, or the early 2023 highs at 313p. A close above the 2015 high at 344p would mark a long-term breakout and potentially provide more bullish momentum.
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa 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.
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