Deposits Took Center Stage in UK Banks' Third-Quarter Results

Deposits dominated earnings calls

Investors all but camped on one question this quarter: where the deposits are going. UBS Group AG's Jason Napier called them "the number one issue on investors' minds," and analysts kept circling back to the topic across calls.

The numbers explain the fixation. Lloyds Banking Group Plc reported a £300 million ($403 million) pullback in UK retail savings over the quarter to Sept. 30. At NatWest Group Plc, an equal decline showed up within the private banking and wealth-management unit.

Barclays Plc said balances in its UK corporate bank were down £2 billion from the preceding period. And at HSBC Holdings Plc, steadiness in a key profitability yardstick was "offset by emerging customer and competitive pressure on deposits" in markets such as the UK.

Why deposit competition is heating up

Deposits are the low-cost fuel for lending, while wholesale funding - borrowing from institutions - comes at a higher price. A thinner deposit base forces banks to either trim lending or pay up to fund it.

RBC Capital Markets analyst Benjamin Toms said management teams broadly signaled that the fight for deposits will persist in the near term, linking part of the squeeze to quantitative tightening - central banks shrinking bond holdings - which tends to weigh on commercial bank deposits. He added that banks are using income from structural hedges, tools that lock in interest earnings, to sweeten rates and entice funds away from rivals.

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Rates matter too. HSBC Chief Financial Officer Pam Kaur noted that higher interest rates are steering savers toward time deposits, which pay more for locking money for a set period but cost banks more. Price comparison is also easier online, amplifying the competition. Barclays Group Finance Director Anna Cross put it plainly on an earnings call: "The thing that is most prevalent in the market at the moment is obviously competition around deposits." Lloyds CFO William Chalmers added a cross-border angle, pointing to "a number of non-UK lenders in the market taking out deposits from the UK market and not recycling them as UK lending."

Who is gaining share

Banks with overseas parents are expanding in the UK, including on the funding side. Banco Santander SA's UK arm said total deposits rose mainly thanks to its April completion of the TSB Banking Group Ltd. acquisition. Deposits were £2 billion higher in the third quarter than in the second, driven primarily by savings balances. JPMorgan Chase & Co.'s UK retail bank ended last year with about £26.7 billion in customer account balances, roughly 17% higher than the year before.

Challengers are chiseling away too. KPMG estimates that building societies, specialist lenders and neobanks together added £50 billion of deposits in 2025. Over 2021 to 2025, the big street names' share of deposits slipped from 85% to 79%. Many challengers, however, still do not lend at large scale.

How banks are responding - and what it means for your portfolio

The largest lenders say the plan is to pull more customer money onto their own books by deepening ties. NatWest CEO Paul Thwaite said the bank is prioritizing "acquiring deposits that give us relationship value and liquidity value." Lloyds' William Chalmers said it will "focus deposit value on those where we have the most valuable customer relationships." Barclays' Cross said the "focus on deposits is not just on term deposits" but "more broadly across the relationship," including higher-income customers.

The backdrop is not easing quickly. Chalmers also flagged energy costs and inflation as continuing pressures, adding, "These conditions look set to persist." The bottom line: as more savers chase better rates and more players bid for their cash, funding mixes and loan growth could shift. Keep an eye on deposit trends in upcoming reports - they flow straight into lending volumes and funding costs, which move bank earnings and, by extension, your portfolio.

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