Banks have been tipped as a big winner of AI integration but face a major test in selling their tech narrative to investors.
As City lenders gear up to report their 2025 financials, shareholders will be looking past balance sheets for progress on digital ambitions.
“This may be the year the market makes up its mind that banks are likely to be significant beneficiaries of AI, particularly as relates to forward efficiency,” analysts at UBS said.
They added that banks would be “pressed hard this year” to share a “coherent financial story for AI implementation: what is being spent now and what it means for the future shape of expenses overall and headcount in particular.”
Barclays will kick off earnings season on 10 February before being followed by Natwest, Lloyds and HSBC.
The FTSE 100 titan has used new tech to dismantle and re-invigorate its core base, including a major modernisation of its legacy code.
Barclays has transformed batches of its decades-old code into modern, cloud-based platforms helping make its previously rigid infrastructure more agile.
This shift has become a common move for financial services giants looking to shed their legacy skin.
Globant – a key tech partner to the top banks – revealed a case study last year where it used agentic AI to transform a 40-year-old system, translating 11,600 lines of rigid, outdated code into a foundation of 5,000 lines constituting a more agile base.
The process took just 105 hours with AI, against an estimated 560 using manual efforts, slashing the development timeline by over 80 per cent.
Banks bet on agentic AI
Other banks have taken up the agentic AI mantle, with Lloyds laying out plans to introduce the “UK’s first large-scale, multi-feature agentic AI powered financial assistant” early in 2026.
Lloyds has bet heavily on tech, going as far as putting its chief executive and top bosses through an AI bootcamp at Cambridge University.
“AI is a game-changer for financial services, and we’re investing to enhance our services with cutting-edge technology,” Lloyds’ group chief operating officer Ron van Kemenade said.
Each of Natwest, Lloyds and HSBC occupy a spot on the top 20 Evident AI index, which serves as a global benchmark for AI integration in the banking sector.
Whilst bosses remain bullish at the top, the threat of AI has continued to cause some trouble among the sector.
The push into modern tech will put some 27,000 roles at risk, representing ten per cent of the UK banking sector’s workforce, according to figures compiled by Juniper Research.
Banks also risk getting swept up in the growing fears around an AI bubble after a string of tie-ups were formed in just the last 12 months.
Tech bank tie-ups
Barclays partnered with Microsoft AI in a partnership set to deploy AI tools to 100,000 bankers whilst Natwest sealed an agreement with OpenAI and HSBC partnered with French tech powerhouse Mistral.
As concerns grow over fears of an AI bubble – even flagged by the world’s most influential banker Jamie Dimon – banks may find themselves caught in the crosshairs.
Still, AI stocks have shrugged off fears and pushed Wall Street to fresh highs. Just last week the S&P 500 notched a record close at 6,966.28p led by a rally in Broadcom and other chipmakers.
Wall Street’s run only came tumbling down at the fate of banks after JP Morgan slipped four per cent and Goldman Sachs followed with a one per cent fall around fears of President Trump’s credit card cap.
In London, banking stocks have enjoyed a bumper year despite broader hazards with the FTSE 350 banks index outperforming the wider blue-chips offering a return of near 50 per cent.
“At this stage investors are unsure as to whether they should invest in the AI leaders or the banks with the most to gain,” UBS analysts said.
Despite the noise around AI equities, London-listed banks triumphed over tech darlings in 2025.
An exchange traded fund solely based on the performance of the Magnificent 7 – Alphabet, Apple, Amazon, Meta, Microsoft, Nvidia and Tesla – offers a near 20 per cent year-to-date return, far below the FTSE 350 banks.
Lloyds – which was one of the City’s best stock performers – also stormed ahead of the Mag 7’s individual performers netting an over 70 per cent gain. Only Alphabet, at around 67 per cent, surpassed Barclays, Natwest and HSBC.