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Some of the UK’s biggest high street banks are set to have grown their profits over the first half of the year, but experts said there could be warnings over the risk of more bad loans as the Iran war pushes up the cost of living.

Barclays, Lloyds Banking Group and NatWest will report their half-year on Tuesday, Thursday and Friday respectively.

It follows an uncertain few months for households and businesses with mortgage rates spiking following the start of the US-Israel’s war with Iran and higher oil prices pushing up fuel and energy bills.

But most experts are expecting the lending giants to have grown their profits over the first half of the year.

Barclays is forecast to report a pre-tax profit of about £5.9 billion for the first six months of the year, up from a £5.2 billion profit the year before.

And Lloyds is expected to have generated £4.1 billion, up from £3.5 billion in the same period in 2025.

Steve Payne, KPMG’s UK head of banking, told the Press Association that banks are likely to continue benefiting from interest rates staying higher for longer, in response to concerns about inflation.

Average fixed mortgage rates shot up in April due to the financial uncertainty prompted by the conflict in the Middle East and have been ticking higher again in recent weeks.

Mr Payne said the impact of the conflict means “we will probably see at least some marginal, maybe slightly bigger than marginal, increases in the bad loan provisions that they put in place for people defaulting”.

“We’ve seen the impact of the war in terms of things like higher fuel and food costs and generally pushing the cost of living higher,” he said.

“And inevitably at some point that has to have an impact on credit quality.

“There is a lag… the longer it goes on for, the more likely we are to see that credit quality deteriorate.”

He said banks were likely to take a “realistic approach” by increasing their provisions.

Richard Hunter, head of markets for Interactive Investor, said: “Amid the ongoing conflict in the Middle East, concerns have grown for higher inflation and crimped consumer spending, which has left the banking sector under some pressure at various points throughout the year.

“As such, levels of customer defaults and impairment charges for possible bad debts will be central for sentiment.

“In a similar vein, interest rates are now expected to remain higher for longer which, all things being equal, should be positive for the sector.

“However, it also raises questions around mortgage availability and affordability, such that reported loan demand will be under the spotlight.”