UK bank stocks were under intense pressure on Monday as investors reacted to ratings downgrades and last Friday’s US bank earnings. Lloyds (LON: LLOY) share price plunged to 43.83p, its lowest point since December 1.

Similarly, HSBC’s (LON: HSBA) stock price collapsed to 592p (November 30th low. The two banks have shed over 8% from their highest level in December. Other British stocks like NatWest, Barclays, and Standard Chartered remain in the red too.

Lloyds and HSBC shares retreated after some analysts downgraded them as the bank earnings season continued. In a note, analysts at BNP Paribas said that HSBC had substantial margin risks. 

While it has benefited from high-interest rates, it faces shocks as they start coming down. As a result, the analysts expect that HSBC’s earnings will drop by 8% in 2025. Other analysts warn that HSBC’s business was still exposed to China’s real estate woes. 

While HSBC is a British bank, it makes most of its money in China, a country that is facing substantial shocks. Data published last week showed that the economy was in a state of deflation, which could drag its performance.

Meanwhile, Lloyds share price plunged after analysts at Bank of America downgraded the company. They cited the recent decision by the Financial Conduct Authority (FCA) to investigate car finance loans made before 2021. Lloyds is highly exposed to the situation and analysts expect that it will cost it over 2 billion pounds.

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