- Big Five FTSE 100 banks returned £35 billion in cash to investors in 2024
- Analysts expect at least £30 billion more in 2025 – or 10% of the quintet’s stock market capitalisation
- 2024 was the biggest cash return ever from the lenders as total pre-tax profits also hit a record high of £50.3 billion
- Those record earnings were achieved despite a drop in net interest income as interest rates began to slowly fall
“Standard Chartered’s fourth-quarter results may have slightly undershot analysts’ forecasts due to higher loan and asset impairment and restructuring costs, but investors do not seem overly concerned thanks to a higher-than-expected dividend for 2024 and a new $1.5 billion share buyback for 2025,” says AJ Bell investment director Russ Mould.
“This rounds out a bumper set of full-year results from the FTSE 100’s Big Five banks which are running like cash machines right now, in terms of how much they earn and how much they are returning to their shareholders.
“In 2024, Barclays, HSBC, Lloyds, NatWest and Standard Chartered generated aggregate pre-tax profits of £50.3 billion, a new all-time high. Encouraged by ongoing cost-efficiency programmes, the absence of an economic downturn, modest loan losses and buoyant financial markets, analysts now expect further modest increases in 2025 and 2026.
Source: Company accounts, Marketscreener, analysts' consensus forecasts for Barclays, HSBC, Lloyds, NatWest and Standard Chartered
“Even litigation and conduct costs remain subdued, despite Lloyds’ additional £775 million in provisions relating to the ongoing investigation into, and legal tussle surrounding, the UK’s car financing market.
Source: Company accounts, Marketscreener, analysts' consensus forecasts for Barclays, HSBC, Lloyds, NatWest and Standard Chartered
“Both of those trends are a support for earnings when it looks like net interest income may be past the peak, thanks to the steady decline in interest rates worldwide. However, the rate of reduction in headline borrowing costs is coming more slowly than expected and that seems to be helping net interest income without, as yet, leading to the long-feared increase in bad loan charges.
“Aggregate net interest income across the Big Five fell by just 8% in 2024 to £67.1 billion.
Source: Company accounts, Marketscreener, analysts' consensus forecasts for Barclays, HSBC, Lloyds, NatWest and Standard Chartered
“The banks continue to generate healthy returns on equity, so they are throwing out plenty of surplus cash, even once they pay their bills, invest in their competitive position and keep regulators sweet by meeting, or exceeding, their regulatory capital requirements.
“It is this combination that enables the big lenders to return large amounts of cash to their shareholders, via dividends and share buybacks. Including HSBC’s £3 billion special dividend, 2024’s total cash returns of £35.2 billion were split evenly between dividends and buybacks.
Source: Company accounts, Marketscreener, analysts' consensus forecasts for Barclays, HSBC, Lloyds, NatWest and Standard Chartered
“The five FTSE 100 banks have already announced buybacks with a total value of £5.5 billion for 2025 and analysts think the eventual total will be £15.5 billion, with £14.8 billion of ordinary dividends on top. That forecast total return of £30.3 billion equates to 10.2% of the current combined stock market capitalisation of Barclays, HSBC, Lloyds, NatWest and Standard Chartered.
“Such largesse may be enough to keep investors interested in the banks, even after their stunning run over the past 12 months. Within the FTSE 350, Banks is the second-best performing sector index out of the 39 sub-groups, with a 62% capital gain. It is also the second-best performer in 2025 to date after a 13% advance, a figure which trails only Precious Metals and Miners.
“That strong run, however, does mean the banks are no longer as cheap as they were. The dividend yields, and total cash yield including buybacks, may still be attractive, but their valuations on the basis of historic net asset, or book, value are now less eye-catching.
“Only Barclays and Standard Chartered trade at a discount to NAV, although given current analysts’ projections, and the assumed absence of any major provisions for legal problems and asset write-downs, it seems logical to anticipate that book value per share will continue to grow steadily.”
