Banks set to report stronger profits as they face prospect of tax hike

Britain’s high street banks are set to unveil stronger profits as they face the prospect of being targeted for a tax hike in the Budget.

Lloyds Banking Group, HSBC, NatWest Group and Santander will report their third-quarter financial results next week.

The announcements will come on the same week that Chancellor John Healey will deliver his autumn Budget statement, on Wednesday October 28.

Banks are widely speculated to be a target with Mr Healey thought to be considering increasing the surcharge on profits from 3% to 8% – reversing a tax cut for the sector introduced by former Conservative chancellor Jeremy Hunt.

The boss of Barclays, which kicked off third-quarter results season on Thursday, said tax hikes would be “bearable”.

Chief executive CS Venkatakrishnan, known within the bank as Venkat, said: “We are already a bank which makes a lot of our money outside the UK so this is not a question of a financial hit to us – it’s bearable.”

It came as the bank reported pre-tax profits £2.3 billion, an increase of 12% on the same quarter last year.

The figures came alongside the announcement that it was planning to cut 5,000 staff this year, or about 5% of its total workforce, as part of cost savings across the bank.

Venkat said deploying artificial intelligence (AI) was the “icing on the cake” of efforts to invest in technology that will make the bank more efficient.

Lloyds Banking Group, which is the UK’s largest mortgage lender, is forecast to report a near-doubling of its third-quarter profit on Thursday.

A consensus of analysts show the banking group reporting a pre-tax profit of £2.3 billion, up from £1.2 billion a year ago.

However, last year’s figures were impacted by a £1.95 billion provision for potential costs related the Financial Conduct Authority’s compensation scheme for drivers who were mis-sold a car loan.

This scheme is currently on hold as it comes up against legal challenges from other lenders and consumer representatives in court.

NatWest is expected to report an operating pre-tax profit of £2.2 billion, which would be flat on the previous year.

While HSBC is forecast to report a jump in earnings to a 9.7 billion dollar pre-tax profit (£7.3 billion), from 7.3 billion dollars (£5.5 billion) the year before.

Richard Hunter, head of markets for Interactive Investor, said increasing the bank surcharge could “reduce earnings by a possible 6%” and “decrease global competitiveness given that its rates of corporation tax are already among the highest to be found globally”.

“It is also thought that the domestic banks, Lloyds and NatWest, could be most affected,” he said.

However, Mr Hunter said Lloyds has been building alternative sources of income such as insurance, credit cards and wealth management which could “lessen the reliance on the more traditional income streams”.

“Meanwhile NatWest is now enjoying a new lease of life,” he added, referring to recent shareholder returns and acquisitions including the £2.7 billion purchase of Evelyn Partners.

Published: 25/10/2026 by Radio NewsHub