The final quarter of 2025 marked a meaningful change in mood towards the UK banking sector. The UK Bank Sentiment Index rose to +21 in Q4 2025, a significant improvement on the previous quarter and the highest reading of the year. After a prolonged period of volatility and uneven performance, sentiment moved more clearly into positive territory, suggesting a sector beginning to regain firmer footing as the year closed.

UK Bank Sentiment Index over time

From outliers to a broader recovery

Unlike earlier in 2025, when sentiment gains were concentrated among a small number of institutions, Q4 saw improvement across a broader set of banks. The sharp divergences observed in Q2 and Q3 eased, with most banks falling within the neutral-to-positive range and only one institution experiencing a particularly challenging quarter.
This does not signal the disappearance of reputational risk. But it does point to a shift away from episodic shocks and towards a more stable baseline of confidence, one built on a quarter of reliability rather than specific issues.

Confidence earned in the everyday

Operational performance was a key driver of sentiment. Q4 showed that confidence is increasingly built day to day, not in isolated moments. Most customers now interact with their bank through a screen, and judge it in small but decisive moments: an app that works, a payment going through, a problem resolved quickly. When services were reliable, confidence rose. When disruption hit, trust fell fast.

Similarly, regulatory and financial control issues also cut through. Enforcement action, legal settlements and governance problems quickly undermine confidence because they suggest weaknesses that sit behind the day-to-day experience, even when services appear to be running smoothly.

Substance beats slogans

ESG followed a familiar pattern. Ambition on its own rarely earned credit. What lands with people is visible progress, particularly on climate finance and emissions reduction. Where commitments looked vague, inconsistent or unsupported by evidence, criticism followed.

Leadership and a clear plan mattered too

Appointments, restructurings and consolidation can split opinion, but banks did better when they explained such moves, acknowledged the trade-offs and stayed consistent. In several instances, good, decisive leadership helped steady sentiment during operational disruption or regulatory pressure.

Other drivers of sentiment in Q4

Beyond the core drivers, Q4 was shaped by big corporate moves, heightened focus on fraud and AI-enabled protection, and renewed debate over branch closures and access to cash. Community presence landed well. Disputes and service disruption did not.

Top issues influencing bank sentiment in Q4

The test in 2026

Q4’s uplift is welcome, but it is also a test. As confidence improves, tolerance for disruption falls and the gap between what banks promise and what customers experience becomes harder to ignore.
The regulatory environment reinforces that shift. Expectations are rising; boards are being pushed to show that services are resilient, that outcomes for customers are tracked and improved, that risks are proactively managed, and that ESG claims are substantiated. 

In that context, reputational risk is a public-facing signal of whether the bank is in control, something the regulators are responding to by bringing communications risk into the compliance and risk agenda, with clear expectations on monitoring sentiment and countering misinformation.

The challenge for 2026 for UK banks is to sustain trust and to stay ahead of it, by monitoring sentiment shifts, tracking emerging sector risks, and acting early when confidence starts to move.

To learn more about the drivers of reputation or to see how your institution compares to the rest of the sector, please get in touch.