Overview
J.P. Morgan analysts foresee several UK banks upgrading their fiscal 2026 revenue guidance after forward markets shifted interest rate expectations. Where markets had previously priced in two rate cuts by 2026 prior to recent geopolitical developments, forward pricing now reflects one rate hike for 2026.
Price target adjustments
In response to the changed rate outlook, the investment bank increased its price target for NatWest Group PLC (LON:NWG) to 780p from 750p and raised its target for Lloyds Banking Group PLC (LON:LLOY) to 121p from 117p. J.P. Morgan kept its 590p target for Barclays PLC (LON:BARC) unchanged.
Drivers: short-term rate repricing
Analysts note the most pronounced short-term interest rate repricing has occurred in the UK, with five-year swap rates up 55 basis points since the onset of the war. That movement increases the portion of rate sensitivity that accrues to UK banks, in part because of hedge reinvestments.
NatWest expectations
For NatWest, J.P. Morgan anticipates an upgrade to fiscal year 2026 revenue guidance to about 17.7bn excluding Evelyn Partners, versus the bank's current guidance range of 17.2bn to 17.6bn.
J.P. Morgan also models NatWest's first quarter 2026 net interest income at about 1% above consensus.
Lloyds expectations
For Lloyds, analysts expect fiscal 2026 net interest income guidance to be raised to around 15.0bn, up from current guidance of about 14.9bn. The bank's projected figures are broadly in line with consensus estimates.
Earnings upgrades and rate path assumptions
J.P. Morgan increased its earnings per share forecasts for domestic UK banks by 1% to 2% for fiscal years 2027-2028. Those upgrades assume a flat interest rate profile through 2026 and one rate cut in 2027.
Balance sheet and credit trends
Bank of England data for February show household deposits rose by 17.4bn in the first quarter of 2026 to date, driven by robust current account inflows of 4.4bn. Loan growth remained healthy at 4.7% year-over-year, with mortgage balances up 3.4%, consumer credit climbing 8.5%, and corporate lending rising 8.6%.
Barclays outlook
J.P. Morgan expects Barclays to experience a strong trading environment in the first quarter, with markets revenue up 11% year-over-year. The analysts also forecast a 0.2bn charge related to motor finance services in the first quarter.
Implications
Taken together, the bank's view is that recent moves in forward rate pricing and stronger-than-expected net interest income could prompt upgrades to revenue guidance across several UK lenders. The analysts' revisions to price targets and EPS estimates reflect these expectations while remaining tied to explicit interest rate assumptions.
Note: This article reports the analysts' expectations and the data cited without asserting outcomes beyond the information provided.