Three UK bank share price targets upgraded
As US tariff risk recedes, at least temporarily, the outlook for UK bank stocks has improved. City writer Graeme Evans looks at this analyst’s sector review.
13th May 2025 13:35
A 25% upside for Barclays (LSE:BARC) shares is among the updated fair value estimates of a City firm after it scaled back its “haircut” for tariff-related geopolitical risk in the UK banking sector.
Shore Capital believes Barclays deserves to be trading at 395p, up from the 385p put in place shortly after first-quarter results beat consensus profit expectations.
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Barclays shares sold off sharply following the Liberation Day tariffs announcement but have since recovered the lost ground, rallying from 241.6p on 9 April to the 313.75p seen today.
The rebound has been fuelled by a softening of the trade war rhetoric, as well as the company’s own strong investment banking performance alongside reaffirmed full-year guidance.
In a change made after the US and China agreed to temporarily and bilaterally lower tariffs on goods shipped between the two countries, Shore reduced the haircut for tariff-related geopolitical risk in its Barclays valuation estimate to 2.5% from 5%.
The City firm has also reduced the haircut on HSBC Holdings (LSE:HSBA) and Standard Chartered (LSE:STAN) from 10% to 5%, which results in improved fair value estimates for both Asia-facing lenders.
HSBC is now seen at 980p, up from 915p previously and a 12% upside after Shore also adjusted the exchange rate used for translating dollar valuation back into sterling to $1.32 from $1.34.
Standard Chartered, which rose 9% on the back of yesterday’s US-China agreement, is now valued at 1,270p compared with 1,195p previously. This represents a 9% upside.
The City firm has not made any changes to its earnings forecasts, having previously preferred to capture the tariff-related risk as a reduction to its fair value guidance.
Standard Chartered’s recent first-quarter results were also better than consensus expected, reflecting strong performances in its financial markets and wealth divisions.
It also reiterated guidance for an underlying return on tangible equity approaching 13% in 2026, although this remains subject to tariff related uncertainty.
Shore introduced a precautionary 10% haircut following the results, which reduced the fair value price target from 1,385p seen prior to the tariffs turmoil.
Still value in the sector
The global uncertainty has overshadowed a succession of earnings beats across the sector, with UBS noting today that only half of European banks outperformed on their results day.
It believes there's still value in the sector even as investors adjust for a lower trough in interest rates and higher impairment rates than it assumed in its own estimates.
UBS notes the European banking sector trades at 8.2 times 2026 earnings, a 40% discount to the broader market, and with a total distribution yield of 9-10% per annum in 2025-2027.
However, a recent improvement in global growth expectations following the easing of the tariffs threat means professional investors are increasingly positioned around the banking sector.
According to a survey today by Bank of America, a net 22% of European fund managers see financials as the best performing European sector group this year followed by industrials.
Among individual European sectors, banks are back to being the top consensus Overweight, at 28%, with insurance (25%) and utilities (19%) also in the top three.
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