The Financials Unshackled Weekender | Issue 66 (26th Oct 2025) - UK Bank Results, Bank Taxes, Motor Finance and Much More

The independent voice on banking developments - No stockbroking, no politics, no nonsense!

The material below does NOT constitute investment research or advice - please scroll to the end of this publication for the full Disclaimer

Welcome to Issue 66 | ‘The Financials Unshackled Weekender (26th Oct 2025)’ - your weekly pack for critique and curation of key banking developments.

🧾What’s in this Note?🧾

The main piece this week is a reflection on UK banks in the wake of 3Q updates from BARC, LLOY and NWG, latest soundings on bank taxes, and the ongoing FCA consultation on a motor finance redress scheme. The note also covers other key UK sector & company news (regulatory loosening, PRA CEO speech, Shawbrook IPO price range, HSBC UK CEO appointment, BARC director share sales, etc.) key Irish sector & company news (BPFI mortgage drawdowns, BOI UK motor finance provision, AIBG mortgage rate reductions, Avant Money 3Q update, etc.), key developments in European banking (debate around looser regulation, interview with the ECB’s Pedro Machado, EBA SREP consultation, etc.), and a few snippets on select global banking developments (McKinsey’s Annual Banking Review, stablecoins versus CBDCs). I hope you can navigate it easily to find what interests you and that you enjoy the read!

Please note that I will not be publishing a Weekender next Sunday (2nd November) - instead I will publish a brief update note on Friday 31st October, picking up on key developments from the week.

🔎 The Critique 🔎

🇬🇧 Reflections on UK Banks 🇬🇧

Barclays (BARC), Lloyds Banking Group (LLOY), and NatWest Group (NWG) published 3Q results (for the three months to 30th September 2025). Updates were encouraging and were warmly greeted by market participants. A few of the chiefs highlighted again the detrimental effects that an increase in UK bank taxes could have and there was further focus on the pushback to the proposed parameters set out in the FCA’s consultation on a motor finance redress scheme on the LLOY call. Some perspectives follow.

UK domestic banks are in undeniably strong shape:

Lots of commonality across the BARC, LLOY, and NWG results this week. Some key observations: 1) All beat 3Q25 PAT consensus (NWG delivered the strongest beat followed by LLOY - and then BARC); 2) All procured some upgrades to FY25 guidance - and all are set to provide FY28 targets at the stage of FY25 results; 3) All seeing UK balance sheet expansion (mid+ single-digits loan growth y/y; low-mid single-digits deposits growth y/y); 4) All (BARC UK referenced here) seeing material NIM (structural hedge income enormously supportive, deposit churn has lessened, mortgage spreads have been stable at c.70bps) and NII (volume and margins both supportive) expansion; 5) All seeing and pointing to continued UK OOI growth momentum; 6) All doing a good job on cost growth containment, delivering positive jaws (NWG is the standout performer here); 7) UK credit quality benign; 8) All over-capitalised and well positioned to optimise CET1 capital via further buybacks (surprise £500m 3Q buyback from BARC as it moves to quarterly distributions); not much discussion of upcoming FPC Capital Framework Review (to be announced on 2nd December at stage of publication of BoE’s Financial Stability Report) but 2Q messaging was that it’s likely to be constructive; 9) All delivering healthy double-digit RoTEs; and 10) Very positive messaging on UK lending volumes and margin outlook.

More detail in ‘The Curation’ section on an individual company basis but that’s the big picture. There wasn’t much - if anything - by way of negative messaging in a UK context bar some cautionary remarks in relation to bank taxes.

Pushback against higher bank taxes unlikely to convince:

Firstly, a few articles to flag from the week in a bank taxes context. CityAM reported here on Tuesday morning that analysts expect a rise in bank taxes, Sky News reported here on Tuesday afternoon on LLOY CEO Charlie Nunn’s plea (on a television interview with the media outlet) for the Chancellor to ignore calls for a windfall tax (“If we are going to have the ability and the confidence to continue to lend into the real economy, to help households and businesses invest, we need to make sure that the financial services system and Lloyds Banking Group really remains healthy in that context”), the FT Lex column predicted here on Friday that “UK banks should prepare to share their profit picnic”, The Guardian reported here on Friday on NWG CEO Paul Thwaite’s comments to reporters (“My view remains that strong economies need strong banks, and I really want to use the capital of the bank to support our customers…You can see in our numbers today, we’re providing a lot of capital to those who are buying houses or moving houses, a lot of capital to businesses … So I think it’s important that strong domestic banks are the backbone of the UK, and the best way to use our capital is to support customers.”), and This Is Money reported here on Friday that Thwaite also noted that “The Government should be thoughtful about the signal [a windfall tax] it sends to investors” (which the media outlet characterised as a warning to the Chancellor in the context of sovereign bond investors though the quote doesn’t make it clear to me that’s what he was suggesting and the following sentence in the article read to me as if it was UK bank investors that Thwaite was actually referring to).

I think the Chancellor will see the current return profiles (NWG delivered a RoTE of 22.3% in 3Q25, for instance - albeit that was top of the charts by a substantial margin) and strong capital positions of the large UK lenders as evidence that they are capable of absorbing a significant uptick in the surcharge without resulting material damaging consequences for UK lending and investor sentiment. As I noted last week, I suspect there is a possibility that the surcharge will go right back up to 8% (from 3%) - I note that some other analysts are predicting it will rise to 5% but this is one area where there seems to me to be a greater risk of consensus optimism than pessimism. If so, I think it is quite likely that we will see an increase in the minimum threshold before which the surcharge becomes payable from £100m to £150m - or, perhaps, £200m - in a show of support to smaller banks (I suspect there has been lobbying in the background). Alternatively, a one-off or time-limited windfall tax might be the route the Chancellor elects to go down instead of bumping up the surcharge (see more thoughts on this below). Finally, I don’t expect the existing reserves remuneration regime will be tampered with - the BoE Governor has staunchly defended the reserves remuneration regime and the Chancellor is on record, acknowledging Bailey’s arguments: “We have no plans to do that. And actually the paying of interest on reserves is part of the transmission mechanism for monetary policy, it’s one of the ways that higher interest rates filter through to the real economy” as the FT reported here in June 2024.

The problem is it’s not a one-size-fits-all. Barclays UK (as distinct from group), LLOY, and NWG are churning out strong underlying returns - however, returns at Nationwide and Santander UK, for example, lag those of the three domestic banks who reported this week (I appreciate the considerations are different for Nationwide but I did some work on their returns profile in any event, which can be accessed in Financials Unshackled Issue 57 on 14th August here) and we have yet to hear from Santander UK in relation to its motor finance provisions, which, at £295m, had, on my own assessment, already looked relatively light prior to the recent announcements regarding expected / actual higher provisions from LLOY/CBG/BIRG/STB. Moreover, the smaller lenders exhibit significant variation in return profiles (though, if the Chancellor were to go down the road of a higher surcharge, an increase in the threshold could be ‘something of a fix’ for them). So, there is validity to Nunn and Thwaite’s warnings this week in the context of potentially negative consequences for UK lending appetite / bank investor sentiment in my view.

An interesting question was raised on the NWG earnings call as to what an appropriate level of returns looks like (as an aside, I wrote about this in an Irish context in the Business Post on 29th May last here) with the analyst in question also asking about what returns will look like / what’s the plan when the structural hedges stop delivering incremental income growth in a few years time. This is a key point. Returns are high at the moment and while medium-term guidance is bullish this is because the large domestic banks’ sizeable structural hedges deferred rising rates benefit capture which is now coming through gradually (but with some force) with a few more years of strong incremental income growth ahead (as an aside, while the constructive benefits of structural hedges in an income smoothing context are clearly evident today, these hedges also, in my view, serve to, in theory though not always in practice (as we saw with the TSC’s interventions!), constrain deposit betas to a degree at the time when deposit pricing is in most focus, i.e., when base rates are on the up - with the scope for ‘political attack’ when base rates have flattened considerably less). But that won’t last forever (indeed, it feels like the question as to what the long-term direction of travel and politically acceptable through-the-cycle returns look like (both are naturally intertwined) is worth an in-depth note at some point - please let me know if you think this would be of interest to you).

The Chancellor will presumably be well-educated on these points ahead of any taxes decision and may look to do something time limited on that basis (while we have seen the surcharge move around in the past, there is a feeling of permanence about where it is struck from an investor evaluation perspective). A one-off windfall tax or a multi-year windfall tax for a time-limited period (e.g., 3 years) could be an alternative action, perhaps with a commitment (if the latter) to review it annually. If that’s the route Treasury goes down, I suspect the large banks will be the primary target and that floors to minimise the impact for smaller lenders will be calibrated. On a final note though, if the Treasury’s consultation in a motor finance redress scheme context is extended (see below), this may well give the Chancellor pause for thought before lashing more taxes onto the sector. Some food for thought.

…But could there be a quid pro quo?:

Indeed, the banks may already privately accept that something is most likely coming on the taxes front given the Chancellor’s fiscal conundrum - but it makes a lot of sense to keep publicly pleading anyway. It is not inconceivable that Treasury could soften its stance in various other ways to try to support the domestic banking sector (e.g., seeking to exert influence on the forthcoming Capital Framework Review, further loosening of capital / leverage regulations, substantial reform of the ringfencing rules, etc.). Indeed, the Chancellor could be ‘flexing her muscles’ in the context of the FCA’s proposed motor finance redress scheme too.

Pressure mounting on the FCA to alter the redress scheme parameters:

Before expanding on the final point in the last sentence of the above paragraph, it is worth flagging some further news / developments in the context of the FCA’s current consultation. The start of the week saw Bank of Ireland Group (BIRG) and Secure Trust Bank (STB) announce that they expect to increase their associated provisioning - and expressing their concerns with the proposed redress scheme, with their messages in this respect consistent with what LLOY and CBG previously called out. BARC then announced on Wednesday that it has taken an additional charge of £235m in 3Q25 (taking its total provision to £325m) to reflect “the FCA’s proposed methodology for the calculation of redress, which is less closely linked to actual customer loss (if any) than previously anticipated” - other than this remark, BARC, unsurprisingly given the lower proportional impact for that bank relative to other lenders, did not set out a list of concerns and appears to be ‘staying away’ from the row as it were. LLOY’s CFO William Chalmers, on the bank’s 3Q25 earnings call, reiterated the lender’s concerns in relation to the proposed redress scheme: “the motor proposals, as put forward by the FCA, are currently disproportionate. And they’re disproportionate, as said, for three main reasons. One is because we believe the determination of unfairness is too broad. Two is because we believe the judgments that are inherent in the proposals do not align to the Supreme Court clarity that was provided earlier on this year. And three is because we think the redress calculation, as said, is at best tenuously linked to harm.”. CityAM reported on Thursday morning here that the LLOY CFO told reporters that the scheme risked “producing anomalous outcomes for customers” which was “not a sensible place to be”, going on to note that “I shan’t comment any further on what we’ll do beyond the consultation process itself” - with the last comment potentially indicating that LLOY has not ruled out calling for a judicial review, as some have been speculating. Additionally, The Sunday Times reports this weekend here that lenders are pushing for the consultation to be extended (it is due to close on Tuesday 18th November) - and also notes that: i) a senior source at one lender told the newspaper that “Everybody’s horrified that they’re [the FCA] unwilling to listen to reasonable arguments”; and ii) a source close to another lender said ““Surely the FCA’s lawyers are telling them that if they fail to give the lenders a proper opportunity to take part in the consultation, it will strengthen their case [in any legal battle]””. This latter quote seems clearly designed to threaten a potential judicial review. On a final note on developments, this article from Bloomberg on Saturday contains a useful round-up of the row between the lenders and the regulator.

I suspect the FCA will come / is coming under significant pressure from the Treasury in relation to the scheme redress parameters - and, presumably, part of the reason for why the banks have elected to be so vocal is because they think it could stimulate the Chancellor to get involved if the FCA is resistant. While one of the above quotes lifted from the press indicate that the FCA isn’t willing to listen, I don’t know the true position and that may well be a one-sided remark. FCA CEO Nikhil Rathi has defended the scheme parameters, characterising them as “a robust set of proposals” but he also has been careful enough to state that the authority is open to changes that are backed up by “good strong evidence”.

Where this all ends up is unclear - but I suspect we could see an extended consultation and a drawn-out fight (indeed, it might suit the banks for the argument to be drawn out in a bank taxes context because if the consultation is still open at the stage of the Budget Reeves will be presumably in a bind as regards what to do) with an ultimate softening of the redress scheme parameters. Of course, any significant softening would increase the risk of litigation and higher associated costs - I flagged this in last week’s note and the question came up on the LLOY 3Q25 earnings call, with the CFO remarking that “if the proposals remain as broad as they are, in many respects at least, we would expect to see better outcomes in the context of litigation, because presumably, the courts will take into account the Supreme Court rulings in the way in which they were made, and presumably, the courts will take into account the linkage between redress and harm. So in that sense, at least, I would expect litigation outcomes to be better than much of what is in the FCA proposals right now.”. Let’s see.

On a final note, the banks have played this reasonably and sensibly. Going back to the initial provisioning post-Hopcraft, they were wise to form their own judgment as to what the realistic end-state probability-weighted scenarios would be - seemingly assuming that sense would prevail in the Supreme Court and in the context of a FCA redress scheme. They were wise to wait and see what the FCA had to say in the wake of the Supreme Court judgment before altering provisioning, and now they have a strong hand as I see it in this stand-off with the FCA.

📌 The Curation 📌

🇬🇧 UK Unfiltered - My Top Picks 🇬🇧

1️⃣ Sector Snippets:

• Various media outlets reported on BoE Governor Andrew Bailey’s warnings at the House of Lords financial services regulation committee on Tuesday in relation to potential loan losses in the private credit market. His comments follow the failures of US auto lender Tricolor Holdings (to which Barclays (BARC) was reportedly exposed, taking a £110m charge in 3Q25 - see Bloomberg article here) and US auto parts supplier First Brands Group. It was interesting to hear the Governor confirm that the BoE is planning a ‘system-wide exploratory scenario’ (aka stress test) on the broad private credit market next year - with Sarah Breeden, Deputy Governor for Financial Stability at the BoE, reportedly noting that several credit and private equity groups which the BoE has reached out to in this context have agreed to take part, along with banks, insurers, and pension funds. A separate Bloomberg article on Wednesday here reports that the BoE is “closely monitoring” standards in leveraged finance markets and is on guard for forced selling in the wake of the Tricolor Holdings and First Brands Group failures, according to comments made by Martin Arrowsmith, Co-Head of the BoE’s Market-based Finance division at a conference earlier that day. For some further reading on the Governor and others’ comments I suggest the FT here, The Times here, and a further article on Bloomberg here.

• I enjoyed reading this transcript of the BoE PRA CEO Sam Woods’s final Mansion House speech on Wednesday 22nd October in which he uses carefully crafted language to defend the diligent posture of bank regulators. Woods’ speech is very balanced but the most pertinent point to highlight is his firm resistance to taking higher-rated government bonds out of the leverage ratio, which is just a backdoor mechanism to reducing capital requirements as I see it. Despite international competitiveness considerations (and how real are those for most UK domestic banks? - albeit there is something of an argument here in an international investor sentiment context I guess), Woods makes highly valid points in my view to support his perspective: “First, it would allow a very large increase in bank leverage given the size of banks’ sovereign holdings. Second, given the way these bonds are already treated in the other leg of our regime (risk-weights), it would largely remove sovereign risk from the bank capital framework where banks hold such bonds in their banking books. And third, unless supervisors top up capital requirements in other ways it would risk forgetting one of the main lessons from the 2023 banking failures – that even bonds issued by sound governments, if liquidated in size, can pose serious risks to banks’ balance sheets due to interest rate risk.”. Separately, Sky News reported on Friday evening here that the Chancellor has formally initiated a search for the next CEO of the PRA.

• Jonathan Hall, External Member of the FPC, gave a speech at the Confederation of British Industry (CBI) on Thursday, setting out a detailed run-through the origins of the FPC and the work it has done to balance efficiency and resilience in support of long-term growth - transcript here. No new information on the FPC’s Capital Framework Review - we will have to wait until 2nd December for that as Hall’s wrap-up commentary indicates: “…within any given envelope of aggregate resilience it is possible for inefficiencies to be present. To reduce such inefficiencies, the FPC has recently simplified and respecified its housing tools and welcomed the PRA’s strong and simple framework for smaller banks. We are also currently refreshing our assessment of the capital requirements in the UK banking system and will provide an update in December.”.

• More documents out from Treasury this week on its mission to “re-energise the regulatory system so that it…supports investment and innovation, increasing productivity and driving economic growth”. Treasury’s ‘Regulation Action Plan - Update and Next Steps’ document was published here and a Policy Paper entitled ‘New regulation to ensure regulators and regulation support growth’ was published here. Nothing specific to call out in a banking sector context beyond what we already know but it shows the seriousness with which Treasury is treating the deregulatory agenda.

2️⃣ Company Snippets:

• Key Notes / Observations from Barclays (BARC) 3Q25 results (Wed 22nd Oct):

  • PAT beat of 3.9% (versus company-compiled consensus) with a mix of beats and misses within - revenues 1.8% ahead (structural hedge income, volumes, and OOI providing strong support), opex 1.6% behind, L&C costs of £255m £180m higher than cons, other net income (note: not OOI!) £36m ahead of cons, impairment charge 5.0% lower than cons, tax charge £102m lower than cons.

  • Marginal beat really but the market was pleased with upgrades to FY25 guidance (BARC now guiding NII of >£12.6bn up from >£12.5bn and RoTE of >11% up from c.11%) as well as a surprise fresh £500m buyback (BARC is now moving to quarterly capital distributions). FY26 targets reaffirmed.

  • BARC UK net loans +7.1% y/y to £213.4bn, deposits +2.2% y/y to £241.5bn, NIM +13bps q/q to 368bps (with 9M25 NIM +38bps y/y to 359bps), and RoTE of 21.8% (19.6% for 9M25) with a “high teens” RoTE target for FY26 - all highlighting the strong UK performance / outlook in particular.

  • UK Corporate Bank saw net loans +16.9% y/y to £29.0bn and deposits +5.3% y/y to £86.7bn. RoTE was 22.8% (9M25 RoTE: 18.8%) with a “high teens” RoTE target for FY26.

  • IB proportionality stuck at 56% of Group RWAs. The target to get it down to c.50% by end-FY26 was always ambitious (I wrote about a potential M&A fix in Financials Unshackled Issue 55 here ("…could it be tempted to buy another specialist lender (despite the fact that the main motive underpinning the Kensington deal was to acquire its platform capabilities) - serving a dual purpose to drive margin (and RoTE) enhancement as well as address the RWAs proportionality conundrum. It would surely be congruent with Venkat’s strategic objective to ‘deliver’ a bank that generates structurally higher returns from a more diversified business model.”)). Venkat’s comments on the earnings call indicated he is trying to de-emphasise that c.50% target, focusing on the flat IB RWAs commitment delivery (which were £199bn at end-3Q versus £197bn at end-FY23, i.e., BARC has delivered here).

  • Lots of focus on its c.£20bn of private credit exposures on the earnings call in the wake of a slide insertion highlighting the strong management of that book (despite the £110m loss noted in ‘The Critique’ section above).

  • FY28 targets will be imparted at the stage of the FY25 results and Venkat was clear that BARC isn’t going to stop at a >12% RoTE (the FY26 target) - which he has said before - and will set out some more detail in this context at that juncture.

  • There were questions on the diverging approaches to capital deregulation in the US and UK/Europe again. Depending on what happens in the US, I think it’s not unimaginable that we could see a break-up of the business at some point - which may be orchestrated by the Board rather than an activist. There have been plenty of questions around USCB’s importance in a group-wide context and, while its centrality has been consistently well-defended, it always struck me that part of the reason for Venkat’s refreshed strategy in early 2024 was to create optionality for a break-up (by reducing overall dependence on IB and enhancing performance of USCB, which, to be fair, management is delivering - though a UK acquisition would go a long way in terms of the former). Worth reading FT Lex here from Wednesday and Rupak Ghose’s piece here on Thursday in IFR in this respect.

  • On a final - and unrelated - note, it was interesting to read an interview with Francesco Cecato (CEO of Barclays Bank Europe) here in The Currency on Friday in which he notes that the bank is firmly committed to Ireland but is still likely to eventually establish its EU HQ in Paris despite BARC noting that this move won’t happen until 2027 at the earliest.

• Barclays (BARC) Director share sales: i) Cathal Deasy (Global Co-Head of Investment Banking) sold 31,112 shares at a price of 382.8p per share on 24th October, yielding him gross proceeds of c.£120k; ii) Adeel Khan (Head of Global Markets) sold 805,636 shares at a price of 384.3p per share on 23rd October, yielding him gross proceeds of c.£3.1m; and iii) Sasha Wiggins (Chief Executive of Private Bank and Wealth Management) sold 124,978 shares at a price of 381.3p per share on 22nd October, yielding her gross proceeds of c.£475k.

• HSBC UK (HSBA) announced the appointment of David Lindberg as CEO with effect from Monday 8th December in a press release on Tuesday 21st October here. He will also join the HSBA Group Operating Committee. Lindberg was most recently CEO of Retail Banking at NatWest Group (NWG) and when I had the opportunity to see him in action at various investor/analyst seminars he always came across as an enthusiastic and ambitious growth-focused executive - which ought to be constructive in the context of HSBA’s UK growth objective.

• Key Notes / Observations from Lloyds Banking Group (LLOY) 3Q25 results (Thu 23rd Oct):

  • Statutory PAT beat of 7.2% (versus company-compiled consensus) - revenues 0.7% ahead, opex 2.0% better, remediation costs marginally higher than cons, other net income (note: not OOI!) £36m ahead of cons, impairment charge 42% (£129m) lower than cons, volatility and other items £71m worse than cons, tax charge £81m higher than cons.

  • LLOY upgraded FY25 guidance - FY25 NII now expected to be c.£13.6bn (up from £13.5bn), AQR expected to be c.20bps (from c.25bps), and RoTE expected to be c.12% (and c.14% excluding motor finance, up from c.13.5%). FY26 targets reaffirmed with Chalmers, again, reinforcing his conviction that LLOY will deliver a sub-50% CIR in FY26. LLOY will be issuing a fresh 3-year strategic plan in early 2026.

  • Net loans +4.4% y/y to £477.1bn, deposits also +4.4% y/y to £496.7bn, and NIM +2bps q/q to 306bps (and 9M25 NIM +10bps y/y to 304bps despite mortgage back book drag relative to peers) - all of which serves to highlight the UK is doing well. CFO also noted that the strong growth in mortgages continues with no sign of a slowdown in applications ahead of the Budget - he also remarked that mortgage spreads have been consistently circa 70bps in each quarter YTD.

  • NII growth strong supported by structural hedge income as well as volume growth, asset spreads, and slower deposit churn. Outlook is for continued NIM expansion in 4Q and in FY26 - with a positive outlook for AIEAs evolution too, so hedge income / volumes / margins all expected to be NII-supportive in FY26, while the business continues to see good growth momentum in non-interest revenues. LLOY is also delivering positive jaws with a keen eye on costs.

  • The CET1 ratio printed at 13.8% and Chalmers repeated previous commentary to the effect that end-FY25 CET1 ratio will be “a staging post” with respect to the end-FY26 c.13.0% target and separately remarked that CET1 is likely to be around the c.13.25% level at end-FY25. He also noted that LLOY sees merit in moving towards greater capital distributions frequency (just once p.a. currently) but didn’t promise anything (it seems clear to me that the motor finance overhang has been holding the Board back).

  • See ‘The Critique’ section above for observations in a motor finance provisioning context. One further point worth noting is that there appears to be a delta (though not a highly significant one) between what LLOY has actually provided and what it would have provided had it applied a 100% probability weighting to the FCA’s current proposed redress scheme methodology. The CFO’s remarks on the earnings call are worth noting in this vein: “…our current provision £1.95 billion best estimate. To the extent there’s a worst case, we can’t be far off, simply because, as said, the FCA case is most heavily weighted in our scenario based planning. Alongside of that, the FCA case captures a pretty adverse outcome. All DCAs for example, most of the commission we receive being handed back, a very high response rate. Those three things tell us that the FCA case, the proposals, if currently enacted, are, as I say, at the adverse end of the spectrum and most heavily weighted in our overall provisioning. So not terribly far off.”.

• Bloomberg reported here on Wednesday that Monzo is considering arranging a new private share sale and is working with Morgan Stanley bankers in this context. Here is an excerpt from Financials Unshackled Issue 49 of 9th June on Monzo’s latest financials: “It was Monzo’s turn to report last week. Monzo adopts an unusual revenue calculation. There’s nothing wrong with that but, to facilitate cross-comparison, I recalculate that revenues were £901m if applying a basis of calculation that is consistent with peer banks, including Starling. Monzo’s £901m of revenues on my calculation methodology still overshadow Starling’s £680m (and Monzo’s revenue growth of 38% eclipsed Starling’s 5% growth) but Starling remains far more profitable. Monzo printed post-tax profits of £94.6m but this included a tax credit of £34.1m - meaning pre-tax profits of just £60.5m versus Starling’s £223m (or £281m on an underlying basis). Monzo’s faster revenue growth profile suggests, at first glance, that one need not share the same concerns about the ‘direction of travel’ of the business as for Starling. But let’s look more closely. Monzo reported end-FY24 deposits of £16.6bn, which were +48% y/y - massively overshadowing the 10% growth in deposits achieved by Starling in the same period - but this growth was supported by growth in instant access balances which come at a price and it was notable that Monzo’s deposit interest expense charge almost doubled in the year. On the assets side of the Balance Sheet, Monzo’s net loan balances sat at just £1.6bn at year-end (well off Starling’s £4.7bn) representing <10% of total assets (with a staggering £11.0bn held in cash equivalents / central banks and >£5bn in an investment securities portfolio which appears to be lower-yielding and lower risk than Starling’s).”

• Key Notes / Observations from NatWest Group (NWG) 3Q25 results (Fri 24th Oct):

  • Statutory PAT beat of 25.1% (versus company-compiled consensus) - revenues 5.7% ahead (mostly OOI-driven), opex 3.8% better, L&C costs £48m below cons, impairment charge 20% lower than cons, tax charge £13m higher than cons.

  • NWG materially upgraded FY25 guidance - FY25 income excl. notable items expected to be c.£16.3bn, up from >£16.0bn (and, notably, NWG is still assuming another base rate cut in November) while RoTE guidance has been revised up to >18.0% from >16.5%(cons: 17.3%). Notably, NWG is targeting FY27 RoTE of >15% though pre-results cons was already at 18.0%. FY26 guidance and new targets for FY28 will be communicated at the stage of the FY25 results.

  • Net loans across the three businesses were +5.7% y/y to £388.1bn (broad-based growth) while deposits were +1.0% y/y to £435.1bn. NIM was +9bps q/q to 237bps taking 9M25 NIM to 231bps (+20bps y/y) and there is positive growth momentum in OOI too - highlighting the strength of a UK-centric banking franchise.

  • CIR reduction delivery is very impressive (supported massively by the positive jaws that is a function of the very strong income growth) with CIR down by 5pps y/y to 47.8% for 9M25. However, u/l opex inflation is similar in profile to LLOY (+2.5% y/y growth for NWG, +2.6% y/y for LLOY; BARC saw much higher opex inflation but partly due to Tesco Bank run and integration costs). It feels like NWG’s costs guidance for FY25 is bearish - and that implied 4Q guidance errs on the side of caution too but it is hard to be definitive given variability in investment spend (and there are other factors in 4Q too, like the levy, which have been well fleshed out on previous earnings calls).

  • The CET1 ratio printed at 14.2% but no colour was given on the call as to when NWG will get down to the lower end of the current target range of 13-14%. Let’s await the FPC review in early December and it wouldn’t surprise me to see NWG and others revise down their target CET1 ranges on the back of it, with potential bumper distributions in store at year-end.

• NatWest Group (NWG) announced on Tuesday the appointment of Josh Critchley as an INED with effect from 3rd November. Rick Haythornthwaite, Chair of NWG, said: “I am delighted to welcome Josh to the NWG Board. Josh brings over three decades of experience in investment banking and capital markets, having advised boards and management teams across a wide range of industries and geographies. His deep expertise in financial services and strategic advisory will be a valuable asset to the Board.”. This is an interesting appointment given his investment banking background and could be a sign that NWG is gearing up for significant possible M&A. Notably, NWG’s structural hedge procures a slightly less elongated tailwind than its peers given its slightly shorter WAL (though I wouldn’t overdo this point; all UK domestic banks are thinking about M&A) - and it is also notable that NWG’s CFO remarked on the post-1H25 sell-side analysts roundtable on 30th July that management generally thinks about 11-12% as a hurdle rate.

• euronews published an interesting interview with Revolut’s Western Europe CEO Béatrice Cossa-Dumurgier on Monday here. Cossa-Dumurgier reportedly notes that it isn’t necessary for the firm to obtain additional banking licences in Europe in order to expand its presence (as it can just piggyback off its Lithuanian licence essentially). This sounds to me like it could be a defensive posture in the context of the firm’s push to attain a French banking licence (though that is not entirely clear to be fair) with Cossa-Dumurgier having previously noted that “Having a second licence in Europe is going to help us better localise our offer and ensure that we complement this very global model of ours”. Granting a licence to Revolut is no small task in my view given the ensuing complexity associated with any such approval process given the firm’s multi-jurisdictional presence and its rapid growth. In a home market context, the BoE will need to be very comfortable with its risk controls framework and, in this respect, I recently provided the following comment to a reporter: “Given Revolut’s existing scale and ongoing growth, any comparison with typical banking licence approval timeframes is futile. Revolut is adding one million customers every 17 days and the regulator needs to be very comfortable that its risk controls framework is sufficiently sophisticated to protect the savings of millions of customers. Moreover, the UK banking licence would denote significant validation of Revolut’s controls framework - with regulators in the US, Australia, New Zealand, and Switzerland said to be waiting for the BoE licence to come through before they issue any other licences. If something goes badly wrong, fingers will inevitably point at the UK regulator and I don’t envy the Governor’s task here.”.

• Shawbrook announced the price range for its IPO here on Tuesday 21st October - which has been set at 350-390p per share, implying an estimated market cap of c.£1.8-2.0bn. Shawbrook also announced the publication of its IPO Prospectus here and the commencement of its Retail Offer here. The price range implies a multiple of 1.25-1.39x end-1H25 tangible book value but that’s in the context of a business that is churning out a high-teens statutory RoTE (and is guiding to a “high teens” medium-term adjusted RoTE target).

🇮🇪 Ireland Unvarnished - My Top Picks 🇮🇪

1️⃣ Sector Snippets:

• Banking & Payments Federation Ireland (BPFI) published its Mortgage Drawdowns Report for 3Q25 on Friday (press release here and report here). Mortgage drawdowns were +16.6% y/y in value terms in 3Q25, with drawdowns amounting to almost €4bn. Furthermore, mortgage approvals for the 12 months to 30th September came to almost €16.9bn - the highest annualised value since the data series began in 2011 - with approvals in September +11.9% y/y in value terms according to this report. Needless to say, both the drawdowns and approvals data is constructive for Irish bank mortgage portfolio growth.

• The Central Bank of Ireland (CBI) updated here this week on its first Innovation Sandbox Programme this week, which focused on financial crime and has been highly successful - a Business Post article here on the sandbox is well worth a read. A second round is set to commence in the new year. This is clearly a very sensible initiative to drive innovation in financial services within regulatory perimeters.

2️⃣ Company Snippets:

• AIB Group (AIBG) announced reductions of up to 65bps in non-Green fixed mortgage rates in a press release here on Thursday here. AIBG’s rates on these specific products were above-market and this, in my view (and despite the bank’s unparalleled ambitions to be a sustainability champion), is simply a sensible bid to capture a greater share of non-green originations flow rather than a sign of any latent increase in competition.

• Bank of Ireland Group (BIRG) announced on Monday that it estimates that its provision in respect of the proposed FCA motor finance redress scheme (see above) could increase from €167m to c.€400m but that any update to the provision will be done within the FY25 results (rather than at 3Q is what I assume this means). Like other lenders, BIRG also sets out its concerns with the proposed methodology of the redress scheme. The upward (potential) move in provisioning, which is a greater proportional jump than seen in the case of CBG and LLOY, is not a surprise as BIRG looked relatively under-provisioned compared with peers (based on historical originations share data, etc.) as I alluded to in Financials Unshackled Issue 34 here. A local media outlet seemed somewhat surprised at the positive market response because the provision was revised up - and above the level that domestic analysts had projected. The reality is the market was already there and it should serve as an important reminder that consensus and the market view can be two very different things - with, I would contend, the propensity for the divergence between the two domestically to be even greater when the tide turns for several reasons.

• Bankinter reported 3Q25 results on Thursday and I have plucked out some relevant facts and comments in an Avant Money context here:

  • Net loans of €4.4bn were +€0.4bn q/q (mortgages +€0.4bn to €3.4bn, consumer flat q/q at €1.0bn). The growth appears to be supported by market-wide growth in originations and a slow redemptions profile - as the Bankinter 3Q25 slide deck notes that Avant’s share of originations in Ireland was just 6% in 8M25 (i.e., the 8 months to the end of August) - consistent with the share of originations of 6% for 5M25 reported at the stage of Bankinter’s 2Q results.

  • 9M25 NII came in at €85m (+16% y/y), 9M25 pre-provision profits were €47m (+16% y/y) while 9M25 PBT was €34m (+17% y/y).

  • On the earnings call, there were a few notable comments made in relation to Bankinter’s Irish business: i) the CFO referenced the new banking IT platform in Ireland; ii) the CFO also commented on the recent soft launch of Avant’s term deposit product in Ireland, which he characterised as “an attractive value proposition that will surely grow deposit volumes over the coming quarters”; iii) the CEO elaborated on the new deposit product in the Q&A, noting that “what we are doing is just a test for the moment. So it’s a friends and family. We are offering this deposit only to our clients and only a certain amount. I mean, initially, we are talking about EUR 50 million. So this is like a welcome deposit, and it’s not going to have any impact at all in this year NII, and I don’t think in next year either because we are controlling, as you can imagine, the growth in these deposits”; iv) in response to a further question, on the deposit product ambitions and the broader ambitions in Ireland, the CFO noted that “the first phase is through the launch of the term deposit that we’ve mentioned before. Our next ambition is going to be the launch of current accounts at the beginning of 2026. And I think this is going to be the great moment of funding the growth that we are expecting in Ireland with deposits from local in Ireland. So we are targeting to fund whatever growth we have in the loan book in Ireland with the deposit book in Ireland as well. So this is the ambition, and this is the next step. We are not considering for the time being to move into the Wealth Management business in Ireland. I think we have plenty of things to capture and to target before that business.”; v) the CEO followed up the CFO’s comments with a remark to the effect that Bankinter’s appetite for M&A is “very, very low” (see more in the PTSB piece below).

• The Business Post ran a piece on Saturday here on how sell-side bank analysts think the Irish Government should move ahead to sell down more stock in PTSB. I also contributed in my capacity as an industry analyst, noting that the State “should just get on with selling down its shareholding in PTSB without delay…The conditions are ripe for a placing following next week’s trading statement and there is proven investor demand for the paper”. Given that the stock price is trading well above the price achieved by the Government at the stage of its last placing, it suggests that, even with a significant discount, the State should be able to move on another chunk of its holding at a price that exceeds the last price achieved (to the extent the current share price sustains). As an aside, in what appeared to be a speculative article in The Sunday Times last weekend, Brian Carey wrote here that the path is clear for Bankinter to zone in on PTSB. While the Bankinter CEO arguably scotched that idea in her remarks on the bank’s 3Q25 earnings call on Thursday (“…with respect to inorganic growth, well, our appetite is very, very low. As you can imagine, we are an organic grower. We have always grown organically in the different businesses and geographies where we have the capabilities, and this is what we are doing in Ireland, and this is what we will continue to do in the future.”), appearing to reserve her acquisition appetite-related commentary for other regions, it does beckon the perennial question as to whether PTSB could come into play. While it might be what the Finance Ministry would like as a neat solution for its 57% shareholding - and given the impending wind-down of the shareholder advisory unit there - no suitor has emerged despite widespread acknowledgment for some time that PTSB could be an ideal market entry lever. I guess if government doesn’t elect to place stock following the 3Q update (assuming that the current share price sustains) then speculation could pick up - but it’s not like the State has a history of 'acting fast’ either and may well be holding off until the expected capital relief materialises on the back of the regulator’s review of PTSB’s IRB models (though this review is well understood in the market, meaning that the outcome of same may be partly priced in anyway), for example. It feels to me like it will be an elongated exit process.

🇪🇺 Europe Unbound - My Top Pick 🇪🇺

1️⃣ Quick Round-Up:

• Interesting lengthy interview conducted by Pedro Machado, Member of the Supervisory Board of the ECB, with Jornal de Negócios on Monday 13th October (published on Tuesday 21st October) with a transcript available here. Machado discusses many matters, including: i) the fact that the ECB hasn’t observed any deterioration in bank balance sheets owing to the macro / political concerns in Germany and France; ii) how SREP reforms will see the ECB become “more agile and streamlined”, focusing on the most material risks affecting each bank and taking a multi-year perspective; and iii) how domestic political resilience to a European deposit insurance scheme (EDIS) is a key obstacle to EZ cross-border mergers “because deposits are not seen to be equally protected across the euro area, which shouldn’t raise doubts”.

• Bloomberg reports that Deutsche Bank CEO Christian Sewing has argued that the ECB should be given a competitiveness mandate alongside its sole focus on financial stability. I agree wholeheartedly and I wrote at length about this in the context of the Central Bank of Ireland recently in Financials Unshackled Issue 60 here. Alas, vision and bravery seem to me to be absent in equal measure amongst Ireland’s play-it-safe politicians so my sense is that a move as ‘bold’ as this won’t be happening any time soon - and I doubt very much that we will see change in Europe either for what it’s worth, a continent that seems destined to fall further and further behind in an international competitiveness context.

• Bloomberg reported here on Friday afternoon that ECB Governing Council member Francois Villeroy de Galhau has cautioned that Europe must not be tempted to follow the US’s lead in a deregulatory agenda context: “We still need regulation and this is our debate with our US partners…It’s obvious. We favor together simplification of some financial rules, but we don’t advocate deregulation. This would be a very dangerous game, seeding — probably — the risk of the next financial crisis.”. He has a point. But, in life, the answer is usually somewhere in the middle and it feels like the US is moving towards one extreme while Europe sits stubbornly at the other end of the spectrum.

• The European Banking Authority (EBA) on Friday launched a public consultation on its revised Guidelines on common procedures and methodologies for the SREP and supervisory stress testing. The revision forms are part of the EBA’s ongoing efforts to simplify and enhance the efficiency of the EU supervisory framework, while supporting a risk-focused and effective supervision. Press release here and Consultation document here.

🌎 Global Unpacked - My Top Pick 🌎

1️⃣ What Grabbed Me This Week:

• Bloomberg reported here on Friday that the US Fed has requested a formal consultation over the 2022 decision that granted EZ banks more favourable treatment for cross-border exposures within the bloc compared with other international activities. I reported in Financials Unshackled Issue 64 on 6th October on this, noting: “Bloomberg reported on Wednesday 1st October here that officials at the US Fed are seeking to repeal a BCBS decision to treat the EZ as a single domestic market when assessing banks’ cross-border exposures. This comes at a time when the US is understood to be diluting the impacts of Basel 3.1 for the benefit of its own lenders - with six regulatory sources indicating to Reuters last week (see here) that the largest lenders are optimistic that the combined changes will see their capital levels remain flat or fall.”.

• McKinsey’s Global Banking Annual Review 2025 was published on Thursday here and is worth a read. The consultancy recommends that banks revamp strategy across four core dimensions: 1) Focusing surgically on technologies with the greatest impact (even within Agentic and Gen AI); 2) Delivering hyperpersonalised access to products and services; 3) Taking a micro-level approach to reallocating capital to strengthen capital returns; and 4) Moving from scale M&A to precision M&A (micromarket, geographic, capability focus). The report’s theme is essentially that “Precision, not heft, is the great equalizer”. The perspectives have strategic validity as I see it - on the hyperpersonalisation point for one (which is clearly interconnected with the other points), I have written in the past how I believe that, with the passage of time, commodity-type lending streams (e.g., UK mortgages) and deposit products will become far more customised (with AI a key enabler in this vein) with banks at the forefront of these changes likely to significantly differentiate themselves from peers and command superior risk-adjusted returns. However, these kind of changes don’t happen overnight.

• Good ‘Explainer’ article on Bloomberg on Friday here on the battle between stablecoins and CBDCs over the future of money. Indeed, it was interesting to listen to some of the UK banks this week talk on their earnings calls about their tokenised deposit initiatives (which would preserve the existing monetary order) and to hear analysts ask questions about stablecoins - giving some balance to the usual dissection of quarterly basis point movements in NIM! I’ve set out some perspectives on stablecoins and CBDCs recently and will look at these fascinating topics in more depth again soon.

📆 The Calendar 📆

Look out for these in the week ahead:

🇪🇺 Mon 27th Oct (09:00 BST): European Central Bank (ECB) Monetary developments in the euro area - Sep 2025

🇬🇧 Tue 28th Oct (04:00 BST): HSBC (HSBA) 3Q25 Results (for the three months to 30th Sep 2025) followed by an investor/analyst call at 07:45 BST

🇪🇺 Tue 28th Oct (09:00 BST): European Central Bank (ECB) Euro area Bank Lending Survey Findings

🇮🇪 Wed 29th Oct (07:00 BST): Bank of Ireland Group (BIRG) 3Q25 Interim Management Statement (for the three months to 30th Sep 2025)

🇬🇧 Wed 29th Oct (c.07:00 BST): Santander UK 3Q25 Results (for the three months to 30th Sep 2025)

🇬🇧 Wed 29th Oct (09:30 BST): Bank of England (BoE) Money and Credit Statistics and Effective Interest Rate Statistics - Sep 2025

🇬🇧 Thu 30th Oct (04:00 BST): Standard Chartered (STAN) 3Q25 Results (for the three months to 30th Sep 2025) followed by an investor/analyst call at 08:00 BST

🇮🇪 Thu 30th Oct (07:00 BST): PTSB 3Q25 Interim Management Statement (for the three months to 30th Sep 2025)

🇪🇺 Thu 30th Oct (12:45 BST): European Central Bank (ECB) Governing Council Monetary Policy Decision followed by a press conference at 13:30 BST

🇪🇺 Fri 31st Oct (09:00 BST): European Central Bank (ECB) Euro area Bank Interest Rate Statistics - Sep 2025

🇮🇪 Fri 31st Oct (11:00 BST): Central Bank of Ireland (CBI) Money and Banking Statistics - Sep 2025

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