UK's Top 10 Banks Witness a £80bn Increase in Market Worth in 2021
FTSE 100 Banks Recover and Attract Investors
In a significant turn of events, the FTSE 100 banks – Barclays, Natwest, Lloyds, HSBC, and Standard Chartered – have collectively generated more than £80bn in market value this year, marking a notable recovery for the sector. This comeback can be attributed to improved financial performance and the return of investor confidence following the pandemic-related downturns.
Among these banks, HSBC, Barclays, and Natwest have led the charge, with HSBC, Europe's biggest lender, generating the most value, gaining over £28bn in market value this year. The banking sector now represents a major sector of the FTSE 100 with a combined market capitalization of £313 billion, underscoring their substantial size and influence.
One of the key reasons for this recovery is the restoration and growth of dividends. During the pandemic, many banks reduced or suspended dividends due to regulatory guidance and increased uncertainty. However, as economic conditions improved, banks like HSBC, Barclays, and Natwest resumed and even increased their dividend payouts. As of August 2025, HSBC offers a notably high dividend yield of 5.0%, NatWest 4.5%, and Barclays 2.3%, all above or near the FTSE 100 average yield of 3.4%.
Another factor contributing to the banks' recovery is the favorable valuation levels. Price-to-earnings ratios remained low compared to historical norms, particularly for HSBC (6.6) and Barclays (8.4), suggesting the market still sees value, supporting the share price recovery and dividend attractiveness.
The FTSE 100 index overall rose by about 11% year-on-year by August 2025, reflecting a broader economic recovery which benefitted the banking sector alongside other large-cap constituents. This broader market trend, coupled with the banks' improved financial performance and attractive dividend yields, has led to a surge in interest from investors.
Investors are flocking to the FTSE 100 banks due to their consistent profits and generous cash payouts. For instance, Natwest initiated a £750m share buyback program and increased its interim dividend by 58% to 9.5p per share following its second quarter results. Similarly, Lloyds' interim dividend surpassed expectations, reaching 1.22p per share.
The banking sector is the second-best performing sector in the FTSE 100 this year, with a return of 37%. This positive performance, combined with the attractive dividend yields and buyback programs, has made the FTSE 100 banks an attractive proposition for income-seeking investors.
Mould, an analyst, stated that the dividend payments and buybacks are an attractive combination for income-seekers. The combined dividends of HSBC, Barclays, and Natwest in the FTSE 100 amounted to £10.7bn in April. The FTSE 350 banks index has risen over 30% for the year, and the Big Five banks are projected to return 11% of their stock market valuations via dividends and buybacks in 2025 alone.
Moreover, the FTSE 100's Big Five banks have created £78.9bn of market value, and Natwest returned to private ownership at the end of May. This recovery and continued growth in the banking sector suggest a positive outlook for income investors in the FTSE 100 banks.
