We preview the upcoming full year numbers from the banking sector
Thursday 14 Feb 2019 Author: Ian Conway

Britain’s big three high-street lenders are due to update the market on full year trading this month with Royal Bank of Scotland (RBS) first to report on 15 February.

Expectations are high with analysts forecasting a doubling of net earnings from £752m in 2017 to £1.58bn in 2018 according to Thomson Reuters.

There are also high hopes that the bank will announce a special dividend along with a deal to buy back up to £1.5bn of its shares from the Government.

The Treasury owns 62% of RBS shares with a market value of c£18bn while estimates put the bank’s potential surplus capital at around £7bn.

It is open for debate whether the Government will sell at these levels as its break-even price is 500p per share against 239p at the time of writing.

Investors will also be on the look-out for further Brexit provisions after the bank surprised the market with £100m of charges in the third quarter.

There is unlikely to be much good news on overall trading as the UK mortgage market remains intensely competitive.

Last week Nationwide building society reported a sharp drop in profit as margins were squeezed by what chief executive Joe Garner described as ‘quite a bit of over-supply’ in the mortgage market.

Similarly, at the end of January Santander UK flagged that its net interest margin fell due to lower margins on new mortgages as customers come off variable rates and lock in cheaper deals.

Next week rivals Lloyds Banking (LLOY) and Barclays (BARC) report their full year earnings with the market expecting £4.2bn of net profit at Lloyds and £1.7bn of profit at Barclays.

Lloyds has suggested that its margins are fairly stable so the focus is likely to be on special dividends or buybacks.

Barclays’ results will hang on the performance of its investment banking business and if results from its US and European peers are a guide they could be ugly.

According to Shore Capital’s Gary Greenwood, fourth quarter trading revenue in fixed income, commodities and currencies were down around 20% for Barclays‘ listed US rivals.

French rivals BNP Paribas and Societe Generale both cut their full year forecasts after trading profits fell sharply last quarter.


Royal Bank of Scotland

REPORTS – FRIDAY 15 FEBRUARY

Watch for: Net interest margins, Brexit provisions, buy back or special dividend

Lloyds

REPORTS – WEDNESDAY 20 February

Watch for: Specials dividends, share buy backs

Barclays

REPORTS – Thursday 21 February

Watch for: Investment banking profits

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