Investing.com -- BofA Securities calls HSBC "our top pick for the sector for the year" and says it is "most positive" on NatWest going into Q3 results.

Analyst Perlie Mong expects a "mixed quarter" for UK banks. Net interest income should benefit from higher rates and good loan growth, but those benefits "will take time to come through," and fee income looks more mixed.

BofA made no change to its price objectives or recommendations, with “buy” rating on NatWest, Lloyds and HSBC and a”neutral” on Barclays.

HSBC

BofA says HSBC is "well positioned in the current environment," with net interest income set to benefit from higher rates and strong Hong Kong deposit growth.

It sees considerable loan growth opportunities, with Hong Kong and UK commercial loan growth at high single digits at the sector level, and expects wealth to keep growing at double digits.

Hong Kong deposits grew around 9-10% in July and August, and loan growth reached c.8%, a level not seen since the CRE credit cycle. Q3 itself is expected to be "relatively quiet."

Hong Kong Exchange turnover was down about 11% and southbound flows about 30% year on year.

A negative capital impact from the HTCNS portfolio, which BofA estimates at roughly $2 billion, limits buyback upside. BofA forecasts a $1 billion buyback against consensus of $1.6 billion.

Management has already upgraded NII guidance to "at least $46bn," and BofA thinks a further upgrade is possible, though it notes the guidance is already open-ended.

NatWest

BofA expects a "relatively clean quarter" for NatWest and cites its loan growth track record and a potential upgrade to 2026 income guidance.

Management’s guidance is for total income excluding notable items of around.£17.9 billion, while consensus is slightly above at about .£18 billion.

BofA thinks management "should be able to increase guidance at least to where consensus is," given strong balance sheet growth and higher swap rates.

Management said in Q2 that H2 net interest margin progression is likely to be "flatter," but BofA thinks the actual print could be better than expected given the current rate environment.

Its forecasts are broadly in line with consensus and slightly ahead on revenues, with total income of £4.67 billion against consensus of £4.63 billion. Management also expects to announce a buyback alongside FY26 results, previously guided for H127.

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