LONDON, Jan 8, 2026, 09:26 (GMT)
- Jefferies raised price targets on Barclays to 560p, Lloyds to 119p and NatWest to 720p.
- The broker said UK banks now make up 17% of the FTSE 100 and still trade at about a 25% discount to the wider market.
- Barclays research kept Lloyds “overweight” and cut NatWest to “equal weight”, pointing to diverging capital returns.
Jefferies has raised its price targets on Barclays, Lloyds Banking Group and NatWest Group, arguing there is still room for UK bank shares to climb despite a sharp run-up. The broker lifted its target on Barclays by 19% to 560p, Lloyds by 13% to 119p and NatWest by 14% to 720p, interactive investor reported. 1
The calls matter because UK lenders were a major driver of last year’s gains in London’s benchmark index and are a bigger part of many portfolios than they used to be. Jefferies said it was getting harder for underweight funds to ignore the sector as banks’ overall weighting has grown to 17% of the FTSE 100.
Jefferies said the group still trades at roughly a 25% discount to the wider market and sits on a two-year forward price-to-earnings multiple — share price divided by forecast earnings — similar to the post-financial-crisis average, despite “improvement in profitability and reduction in risk”. It said the sector could keep re-rating as each quarter of delivery builds the case that profits are “more predictable and sustainable”.
The broker’s new targets add 2028 estimates for the first time, with earnings per share seen on average 10% higher than its 2027 expectations. UK domestic banks delivered an 80% total shareholder return in 2025, taking the two-year aggregate to 185%, and the sector’s five biggest names added 717 points to the FTSE 100’s 1,800-point rise last year, led by HSBC, according to the report.
Shares were mixed in early London trading. Lloyds was around 99p, Barclays about 483p and NatWest near 635p, leaving Jefferies’ new targets implying further upside from current levels. https://www.google.com/finance/quote/NWG:LON?hl=en
In a separate note dated Wednesday, Barclays kept Lloyds rated “overweight” and cut NatWest to “equal weight”, while keeping NatWest’s price target unchanged at 700p. Barclays forecast Lloyds’ return on tangible equity — a measure of profit generated from core capital — building to about 20% by 2028 and said it expected a stronger capital-return profile than NatWest, citing differences in capital generation and risk-weighted assets, a regulatory measure of balance-sheet risk. https://www.investing.com/news/stock-market-news/barclays-favors-lloyds-over-natwest-cites-stronger-capital-and-20-rote-4434180
Jefferies analysts Jonathan Pierce and Piriya Rathod flagged Lloyds’ “longer than average” structural hedge as a tailwind, City AM reported. Structural hedging is a bank’s practice of using interest-rate hedges to smooth income when rates move; the Jefferies team said maturing hedges put on at lower rates are set to be replaced at higher current levels, and forecast more than £1 billion being added to Lloyds’ profit in both 2027 and 2028. 2
But the rerating story has obvious tripwires. Jefferies said the biggest risk remains a major revision in interest-rate expectations, and it also pointed to the potential impact of a change at the top of government and tougher competition for deposits that could squeeze lending margins.
