UK banks brace for first-quarter reports after Trump tariff turmoil

TruthLens AI Suggested Headline:

"UK Banks Prepare for Earnings Reports Amid Tariff-Related Challenges"

UK banks brace for first-quarter reports after Trump tariff turmoil analysis cover image The Guardian 8.0
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Original Article Source: https://www.theguardian.com/business/2025/apr/28/uk-banks-brace-for-first-quarter-reports-after-trump-tariff-turmoil
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TruthLens AI Summary

UK banks are set to release their first-quarter earnings reports this week, which are expected to reflect the implications of Donald Trump's recent tariff announcements. The first-quarter profits will only cover the period before Trump's 'liberation day' tariffs were imposed on April 2, leading to concerns among investors about potential caution in future earnings forecasts and an increase in provisions for defaults by borrowers affected by these tariffs. Analysts predict a divide among UK lenders, with those focusing on domestic customers, such as NatWest and Lloyds Banking Group, likely to fare better than those with significant exposure to international markets, particularly in Asia. Banks like HSBC and Standard Chartered, which heavily rely on their operations in Asia, are expected to be more adversely impacted by the tariffs, with HSBC projected to report a 38% decline in profits due to the trade war overshadowing any positive developments from its wealth management operations and ongoing cost-cutting measures.

As the earnings reports approach, investors are particularly wary of how a weaker economic outlook might influence future dividends and share buybacks. HSBC is anticipated to allocate $868 million for potential defaults, a significant increase from the previous year. Meanwhile, Barclays, which is also releasing its results this week, faces uncertainties due to its substantial US operations, where consumer lending exposure is a concern. In contrast, NatWest's profits are expected to rise by 20% to £1.6 billion, while Lloyds anticipates a 6% dip in profits but will set aside a much higher amount for bad debts compared to last year. Analysts suggest that despite the challenges posed by the global economic environment, some investors may shift their focus to UK banks, particularly those with strong domestic franchises, as they look to navigate the ongoing uncertainties in the market.

TruthLens AI Analysis

The news article highlights the potential impact of Donald Trump's tariff policies on UK banks, particularly in relation to their first-quarter earnings reports. It paints a picture of uncertainty in the financial landscape that UK lenders, especially those with significant operations in Asia, may face due to external geopolitical factors. The focus on the upcoming earnings reports and the expected decline in profits for banks like HSBC indicates a cautious outlook among investors.

Financial Stability Concerns

Investors are likely to scrutinize the upcoming earnings reports for indications of financial instability linked to tariffs. The article emphasizes that banks with heavy exposure to markets affected by Trump's trade policies, such as China, may be more vulnerable. This creates a narrative of impending financial strain, especially for international banks compared to those with a domestic focus.

Divided Banking Sector

The article suggests a bifurcation in the banking sector, where domestic banks like NatWest and Lloyds may fare better than their counterparts, such as HSBC and Standard Chartered, which are more exposed to international risks. This division could heighten investor concern about the sustainability of profits and dividends, potentially leading to market volatility.

Impact on Investor Sentiment

The expected decline in profits for HSBC raises questions about future dividends and overall financial health. This could potentially lead to a lack of confidence among investors, affecting stock prices and investment strategies in the banking sector. The narrative of caution surrounding earnings forecasts may also detract from the positive aspects of banks’ operations, such as wealth management fees.

Broader Economic Implications

The ramifications of the tariff situation extend beyond the banks themselves; they could influence the broader UK economy. If banks struggle due to increased defaults or decreased lending activity, this could lead to a slowdown in economic growth. The article indirectly suggests that the financial health of UK banks is a bellwether for the overall economic climate.

Community Reactions and Market Dynamics

This article seems tailored to an audience that is concerned about economic stability and investment risks. Investors, financial analysts, and economic policymakers are likely to be particularly interested in the insights provided. The focus on corporate performance and economic forecasts indicates a target demographic invested in the financial health of the banking sector.

Potential Market Effects

The news may lead to a cautious approach among investors regarding stocks of banks heavily impacted by tariffs, particularly HSBC and Standard Chartered. If the anticipated profit drops materialize, this could create a ripple effect in stock markets, impacting not only these banks but also related sectors.

Geopolitical Context

This coverage connects to larger geopolitical discussions surrounding trade policies and their economic implications. The relationship between the US and China, as well as the UK’s position within this context, is crucial for understanding the potential outcomes for UK banks. The focus on tariffs highlights the interconnectedness of global markets.

Use of AI in Reporting

While it is unclear if AI specifically influenced the writing of this article, the structured presentation of financial data and expert opinions suggests a reliance on analytical models. AI could have been used to synthesize financial forecasts or analyze market trends, influencing how the information is conveyed.

The article serves to inform the public about the potential economic challenges facing UK banks due to external pressures, particularly tariffs. It raises important questions about the sustainability of banks’ profits in a shifting geopolitical landscape, aiming to prepare investors for possible outcomes.

Unanalyzed Article Content

Source URL: https://www.theguardian.com/business/2025/apr/28/uk-banks-brace-for-first-quarter-reports-after-trump-tariff-turmoil

UK banks’ earnings reports will be studied this week for signs of turmoil linked to Donald Trump’s tariff drama, withuncertainty over global growthlikely to weigh on lenders with heavy exposure to China, including HSBC.

First-quarter profits only reflect the January-to-March period that preceded the US president’s“liberation day” tariff announcements on 2 April. But investors will be concerned about any hints of caution around earnings forecasts, as well as an uptick in money put aside for defaults by tariff-hit borrowers.

The issue is expected to divide UK lenders into two camps: those focused on domestic customers – notably NatWest andLloyds Banking Group– and those with large operations in the US, China and the EU, which have been harder hit by Trump’s border taxes and retaliatory tariffs.

“Asia-focused banks are likely to be more impacted by tariffs than the domestics, given that is the region where tariffs will hit hardest, affecting credit demand, credit risk, client activity – for example wealth management – and also via changes to interest rates,” said Gary Greenwood, a banking analyst at Shore Capital.

That will put the spotlight on the likes of HSBC andStandard Chartered, which are due to report on Tuesday and Friday, respectively, and make the bulk of their profits in Asia. China has so far been slapped with a 145% total tariff on most goods and has retaliated with a 125% rate on US imports.

HSBC is expected to report a 38% fall in profits to $7.8bn (£5.8bn),with analysts saying the trade war would “overshadow tailwinds”, including strong fees from Asian wealth management operations and the first benefits of a £1.2bn cost-cutting drive due to finish by the end of 2026.

The lender is in the process of shutting some of its investment banking operations in the UK, US and Europe as part of a wider corporate shake-up under its chief executive, Georges Elhedery.

Investors will also be concerned about whether a weaker outlook might curb future dividends and share buy-backs. “It remains to be seen whether management feels such largesse is prudent in light of the ongoing macroeconomic uncertainties,” Russ Mould, investment director at AJ Bell, explained. HSBC is expected to put aside $868m for potential defaults, a 20% rise from the same period last year.

Barclays, which will release first-quarter results on Wednesday and has a sizeable US operation, could also face some risks. “The situation with Barclays is unclear,” Greenwood said. “Exposure to US consumer lending is a concern but the impact on the investment bank could be mixed, with the markets activity potentially benefiting from increased volatility albeit with this also proving detrimental to capital raising.”

By contrast, domestic banks are expected to be relatively insulated from the impact of the tariffs.

NatWest, which reports on Friday, is due to seefirst-quarter pre-tax profits rise 20%to £1.6bn. Profits are forecast to dip by 6% at Lloyds to £1.5bn for the first quarter. But both banks are expected to put aside far more for potential defaults by borrowers compared with last year, as the economic outlook weakens.

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In what are expected to be its last results before thegovernment sells its final stakein the bailed-out bank, NatWest is forecast to put aside £169m for bad debts, up 81% from a year earlier.

Bad debt provisions at Lloydsare forecast to have quadrupled to £279m.Lloyds, which is also awaiting a supreme court ruling to determine payouts over the ongoingcar loans commission scandal, will report on Thursday.

Benjamin Toms, a banking analyst at RBC Capital, said investors might still flee to UK banks. “To the extent there is a wall of investor money leaving US banks into European and UK financials, those banks with strong, established, domestic franchises could be beneficiaries of heightened investor interest,” he said.

Wall Street’s largest lender, JP Morgan, this month put aside $973m (£730m) in the first quarter to help protect the bank from potential defaults by its borrowers amid a worsening global economic picture.

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Source: The Guardian