The Week Ahead: Figures due from Barclays, Lloyds, Thomas Cook and Rolls-Royce
- Credit: PA
Full-year figures from Barclays and Lloyds Banking Group will see the familiar themes of job losses and bonuses return to the fore this week, while both will also reveal the impact of yet another year of scandal on their results.
First up is Barclays on Tuesday when it will confirm its overall bonus pool for 2013 and is likely to face questions over plans for more job cuts in its investment bank and potential branch closures.
Barclays boss Antony Jenkins sought to head off criticism when he waived a bonus for 2013 worth up to £2.75million after “very significant costs” over a series of scandals and a cash-call on shareholders.
But its overall bonus pot will also be watched closely, given that it added £2billion to its bill for customer mis-selling scandals in 2013 and tapped shareholders for £5.8bn in a rights issue in the autumn.
It paid out £2.17bn in total incentives, including a £1.85bn bonus pot, for 2012 and is reportedly planning to pay out between £2.3bn and £2.4bn for 2013.
Given that it has axed at least 1,800 jobs in its investment bank already, this would mean higher average bonuses for each member of staff.
Mr Jenkins is set to give an update on his Project Transform programme to overhaul the bank’s culture and practices, launched after he took over from former boss Bob Diamond in the wake of the bank’s £290m Libor rigging fine.
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It is already reported to be planning to axe several hundred jobs at a senior level in its investment banking business as well as ordering staff to cut out all non-essential overseas travel to slash costs.
The group will also be pressed on branch closures, in spite of its denial of recent reports that up to a quarter of its 1,600 sites in the UK could close.
The costs of the group’s overhaul were shown to have taken their toll on results at the half-year stage, leaving underlying pre-tax profits down 17% to £3.6bn. Barclays also recently said it would be setting aside an extra £330m to cover litigation and regulatory costs when it reports results next month.
Banking analyst Mike Trippitt at Numis Securities is pencilling in a 7% fall in Barclays’ revenues to £1.95bn in the fourth quarter against £2.11bn in the previous three months.
Lloyds has left little to be revealed in its annual results due out on Thursday, having already released a shock update revealing an extra £1.8bn in PPI provisions and guided towards a small profit for the year.
Its PPI hit took the market by surprise as it sent the overall cost of compensation for the mis-selling scandal at the bank to nearly £10bn. The group has also made a further provision of £130mn relating to the sale of interest rate hedging products to small and medium-sized businesses, bringing the total amount set aside to £530m.
Despite the provisions, Lloyds still expects to make a small statutory profit for the last year and to better City expectations with an underlying profit of £6.2bn for 2013. This would compare with bottom line losses of £570m in 2012 and £2.6m profits on an underlying basis.
However, while the group will hope to focus attentions on its return to bottom line profits, boss Antonio Horta-Osorio may come under pressure over his bonus plans. He could be in line for up to £2.4m, a maximum of 225% of his £1.06m base salary, for 2013, on top of a bumper payout worth more than £2m for 2012, which was recently given the green light after share price conditions were met.
As well as being tainted by mis-selling scandals, the group’s return to health has also come at the expense of jobs, with Lloyds last month revealing 1,080 staff cuts across its retail, risk, operations and commercial banking divisions, while 310 roles will move to other employers.
Thomas Cook will be hoping to build on what chief executive Harriet Green called the “great success” of the first year of its turnaround plan when it publishes a first quarter trading update on Tuesday.
The 173-year-old travel operator is battling to return to profit and under Ms Green’s leadership it more than halved losses to £207m in the year to September from £590 million the year before.
Announcing the annual results in November, the holiday boss outlined plans for a further wave of cost reductions at the group, which has already slashed its network of travel agencies from more than 1,100 to less than 874 with 2,500 job losses.
Ms Green said she was not ruling out further job cuts, but stressed the focus of the plan was not on reducing its workforce.
Numis analyst Wyn Ellis expects the group to narrow underlying losses from the £70m reported for the same period a year before, in what is traditionally its weakest quarter, though unrest in Egypt and Thailand is predicted to have had a negative effect.
He said more important than the trading results for the period will be what the company says about bookings for the key summer months and progress on profit improvement targets.
“We believe that the poor weather in the UK over the last several weeks may have helped to stimulate early summer booking,” he added.
It will come days after an update from its rival, Thomson and First Choice parent TUI Travel, saying summer 2014 bookings in January had seen higher average selling prices and volumes up against tough comparatives.
Rolls-Royce reports full-year figures on Thursday after lifting expectations with a previous update when it indicated it would see good underlying profits growth for 2013 and a modest rise in sales.
The engines company hailed deals to work on the next generation of Royal Navy warships and power new Japan Airlines aircraft as it issued the update in November, which lifted shares.
Since then it has also announced a 300m US dollar (£184m) order from Qatar Airways for Trent 700 engines to power five Airbus A330 freighter aircraft. It has also been awarded a 215m US dollar (£132m) contract for a US F-35 fighter programme and a five-year 138m US dollar (£85m) services deal with Petrobras to support oil production activities off Brazil.
However in December it emerged that the Serious Fraud Office had opened a criminal investigation into bribery and corruption allegations at the group. Analysts at Bank of America Merrill Lynch estimate US and UK corruption investigations could cost the group £100m penalties.
The City consensus for pre-tax profits, however, sees an increase from £1.36bn to £1.75bn, or 28%.