UK bank stocks were under intense pressure on Monday as investors reacted to ratings downgrades and last Friday’s US bank earnings. Lloyds (LON:LLOY) share price plunged to 43.83p, its lowest point since December 1.
Similarly, HSBC’s stock price collapsed to 592p (November 30th low. The two banks have shed over 8% from their highest level in December. Other British stocks like NatWest (LON:NWG), Barclays (LON:BARC), and Standard Chartered (LON:STAN) remain in the red too.
Lloyds and HSBC (LON:HSBA) shares retreated after some analysts downgraded them as the bank earnings season continued. In a note, analysts at BNP Paribas (EPA:BNPP) said that HSBC had substantial margin risks.
While it has benefited from high-interest rates, it faces shocks as they start coming down. As a result, the analysts expect that HSBC’s earnings will drop by 8% in 2025. Other analysts warn that HSBC’s business was still exposed to China’s real estate woes.
While HSBC is a British bank, it makes most of its money in China, a country that is facing substantial shocks. Data published last week showed that the economy was in a state of deflation, which could drag its performance.
Meanwhile, Lloyds share price plunged after analysts at Bank of America (NYSE:BAC) downgraded the company. They cited the recent decision by the Financial Conduct Authority (FCA) to investigate car finance loans made before 2021. Lloyds is highly exposed to the situation and analysts expect that it will cost it over 2 billion pounds.
UK bank stocks are also reacting to the mixed US banking results published last week. Most bank stocks retreated even after they released strong financial results. JPMorgan (NYSE:JPM) shares dropped by 0.75% even after its net annual income jumped to over $49.6 billion.
Similarly, Bank of America stock fell by over 1% after the company’s results missed analysts’ estimates. Citigroup shares jumped because its weak financials were in line with expectations. It also announced that it will shed 20,000 jobs in the next two years.
UK banks are much different from their American peers. For one, big banks like Goldman Sachs (NYSE:GS), BofA, Wells Fargo (NYSE:WFC), and JPMorgan do more than retail and commercial banking. They offer services like investment banking and wealth management. In contrast, banks like Lloyds and NatWest focus mostly on traditional banking operations.
UK banks will publish their earnings in February. Lloyds will release its earnings in February while Barclays will come in on February 21st. HSBC and NatWest will publish on 21st and 16th, respectively.