Top British banks set to reveal lower earnings amid mortgage price war

UK banking giants Lloyds and NatWest will report their half-year results on Thursday and Friday respectively.

Top British banks are set to reveal lower profits (Joe Giddens/PA) (PA Archive)

Top British banks are set to reveal lower profits as the benefit from higher mortgage rates starts to subside, despite elevated borrowing costs still gripping households across the country.

UK banking giants Lloyds and NatWest will report their half-year results on Thursday and Friday respectively, while Santander will also update investors on Wednesday.

Lloyds Banking Group, which incorporates the Halifax brand and is the UK’s largest mortgage lender, is expected to report a pre-tax profit of £3.2 billion for the first six months of the year.

It would be about a fifth lower than the £3.9 billion half-year profit the bank generated this time last year.

Lloyds was among the UK lenders to report bumper profits, with its income boosted by higher interest rates which allow banks to charge more for loans.

But earnings started to retreat from 2023 highs at the start of this year as competition in the mortgage and savings market heated up.

Investors will be looking to see whether the level of lending remained subdued in recent months, as buyers continue to hold out for borrowing costs to come down.

Gary Greenwood, a research analyst for Shore Capital Markets, said the outlook is “perhaps more encouraging given improving UK economic sentiment and especially if base rates begin to fall” in the second half of the year.

This is likely to drive a pick-up in demand for loans, he said.

UK interest rates currently stand at 5.25%, which they have been held at since August last year.

Meanwhile, NatWest is expected to report an operating pre-tax profit of £2.6 billion for the six months to June, £1 billion lower than the £3.6 billion recorded this time last year.

The banking group said in April it had seen consumer confidence start to improve, and reported an increase in both savings and current account balances since the end of 2023.

Mr Greenwood suggested that this trend could have slowed in recent months, with fewer people moving money into long-term savings accounts after a spike in transfers last year.