NatWest (LSE:NWG) shares have been on a heated streak lately, and they’re not alone. Everything is gigantic FTSE100 banks have performed well in recent years, including focusing on China HSBC Holdings (LSE: HSBA). Can it continue this year?

Personally, I’m not so sure. Banks have been boosted by higher interest rates, which have helped them boost net interest margins, the difference between what they pay savers and what they collect from borrowers. However, central bankers have been cutting interest rates recently, and more cuts are likely in 2026.

Similar action performance

NatWest shares rose 64% last year and are up a staggering 265% in five years, with dividends included. The bank enjoyed an additional boost because it was finally out of taxpayer hands. In its full-year 2024 results, the company reported a profit of £6.2 billion, a return on actual capital (RoTE) of 17.5% and returned £4 billion to shareholders through dividends and share buybacks. Nice job.

HSBC’s share price is up 52% ​​last year, slower than NatWest but still very forceful, while its five-year return is around 215%. HSBC is also generous with dividends and buybacks, although it is withholding them for nine months until minority investors in the Hong Kong lender are bought out Hang Seng Bank.

HSBC’s exposure to China and Asia is often seen as an advantage, but it also adds another layer of risk by tying performance to the region’s economic situation. International diversification can work both ways. NatWest’s increased focus on the UK provides simplicity and perhaps a degree of security, but limits long-term growth prospects.

Both banks apply surprisingly similar valuations. NatWest looks decent with a price-to-earnings ratio of around 12.42, while HSBC is just above it at 12.65. Their price-to-book ratios are also similar, with NatWest around 1.22 and HSBC closer to 1.35. These aren’t bargains, but they aren’t terribly exorbitant either.

Dividend horizon

The earnings outlook looks solid for both companies. NatWest’s dividend yield is around 3.27% but is expected to reach 5.28% in 2026, while HSBC’s dividend yield is around 4.24% and is expected to reach 4.73% this year. Investors receive not only a decent level of income, but one that should continue to boost over time.

I think that after such good series, both players will have a bumpy year ahead of them. Brokers seem to agree, with the consensus annual price forecast for NatWest suggesting the shares could reach 673p. If true, that would mean an boost of just 2.35%. This looks positively bullish compared to HSBC’s consensus forecast, which has a one-year price target of 1,112p, down 6.7% on today.

This confirms my suspicion that investors cannot expect the same spectacular growth over the next year. I still think both are worth considering when building a long-term portfolio, but neither bank looks as electrifying as it did at the beginning of the rally. They would look tempting if markets fell, but as things stand, investors may find quicker recovery opportunities elsewhere FTSE100 Today.