Goldman Sachs expects Nvidia ’beat and raise,’ lifts price target to $240
Investing.com -- U.K. banks are experiencing accelerating loan growth and improving deposit mix, according to September Bank of England data analyzed by UBS.
The domestic U.K. banks reported third-quarter 2025 results last week, outperforming the European bank sector by an average of 3% on the day of their announcements. The banks delivered underlying pre-provision profit and profit before tax beats of 3% and 8% on average.
Loan momentum increased 1% quarter-over-quarter, aligning with the performance of the three major listed banks. Deposit volumes were slightly higher with an improving mix, while credit quality remains very strong.
U.K. loans rose 0.3% month-over-month in September, driven by growth in mortgages (+0.3%) and corporate lending (0.5%). Year-on-year growth continued to accelerate, reaching 3.8% in September compared to 2.5% six months ago and 1.5% a year ago.
Corporate lending showed particularly strong growth at 6.4% year-over-year, while mortgage lending increased 3.1% year-over-year in September 2025.
Despite policy rates decreasing 125 basis points from their peak in July 2024, back book mortgage yields have increased 20 basis points since then. This has helped offset falling corporate yields for an unchanged overall loan portfolio yield since rate cuts began.
U.K. deposits increased 0.7% month-over-month, with sight deposits rising 1.0% and time deposits remaining flat quarter-over-quarter. Both household (+0.5%) and corporate sight deposits (+2.5%) increased, led by interest-bearing accounts.
Time deposits as a percentage of total deposits fell 20 basis points month-over-month to 33.3%. The overall UK deposit rate decreased 4 basis points to 2.05%, with the deposit beta since the first rate cut at approximately 30%.
U.K. domestic banks currently trade at an implied cost of equity of 12.2% compared to the European bank sector’s 11.2%. UBS maintains Buy ratings on Barclays PLC (LON:BARC), NatWest Group PLC (LON:NWG) and Paragon Banking Group PLC (LON:PAGPA), with Neutral ratings on Lloyds Banking Group PLC (LON:LLOY) and Close Brothers Group plc (F:CBRO).