The Week Ahead: Third quarter figures due from Barclays, Lloyds and RBS
- Credit: PA
The spotlight will be on banking this week, with Barclays Lloyds Banking Group and Royal Bank of Scotland among those reporting third quarter figures.
Investors will want to hear more about the expected appointment of investment banker James “Jes” Staley to head Barclays at its update on Thursday, as the bank bids to rejuvenate its fortunes.
The move to install the former JP Morgan banker as chief executive is seen as signal that the group wants to return to its former investment banking glory.
It is thought the announcement could be made within the next few weeks, ending a three-month search to replace previous boss Antony Jenkins, who was sacked in July for lacklustre revenue growth and a flat share performance.
Analysts at UBS expect Barclays to post third quarter pre-tax profits down 4% compared to a year ago to £1.8billion, “largely due to weaker investment banking revenues”.
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Chairman John McFarlane has been acting as interim chief executive since mid July following Mr Jenkins’ departure. At that time Mr McFarlane said the bank needed “more rapid revenue growth”.
He added: “We have 375 management committees at Barclays. We are too cumbersome, and need to become leaner. Our senior managers tell us there is too much bureaucracy, and they want to be trusted to make decisions.”
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Conduct issues relating to the financial crisis will remain a concern for whoever leads the bank, and indeed for all major lenders.
Earlier this month, Barclays said it would pay 325million US dollars (£210m) to resolve two civil lawsuits relating to the purchase of US residential mortgage-backed securities. Barclays does not admit fault in the settlement.
Lloyds Banking Group is expected to post a rise in quarterly profits at its results on Wednesday, as it books lower costs. Analysts at Investec expect the bank to report underlying third quarter pre-tax profits up 4.5% to £2.3bn compared to a year ago, as it logs lower payment protection insurance (PPI) costs and other charges.
Investec said in this quarter it expected the bank, led by chief executive Antonio Horta-Osorio, to report “modest revenue growth, lower costs and potentially no charge at all for PPI, or other conduct issues”.
The Government continues to offload its stake in Lloyds and earlier this month sold a further 1%, reducing its holding to less than 11%, down from 43% in 2009.
Also, this month Chancellor George Osborne has announced that around £2bn of Lloyds shares will be made available to retail investors in the spring.
The stock will be sold at a 5% discount to the market price, and in a bid to avoid wealthier investors snapping up the lot, anyone applying for less than £1,000 worth will be prioritised. All proceeds from the sale will be used to pay down the national debt.
The Government has so far recouped £15.5b of the £20.5bn it spent rescuing Lloyds, and currently owns just under 11% of the bank.
State-backed Royal Bank of Scotland (RBS) is expected to deliver solid quarterly figures on Friday, but investors will want a detailed update on its current shape in light of the share sale the Government has launched.
RBS is expected to post an adjusted third quarter operating profit of £988m, but minds will be concentrated on the £2.1bn share sale announced by Chancellor George Osborne in August at a more than £1bn loss to the taxpayer.
Mr Osborne insisted the move was the ‘’right thing to do for the taxpayer’’, coming seven years after the Government rescued RBS with a £45.5bn bailout at the height of the financial crisis.
It marks a milestone moment for the banking sector as it puts the crisis behind it, while it also kick-starts the Treasury’s plans for a bigger privatisation programme than in the 1980s with aims to raise more than £30bn by the end of next March.
But concerns have been raised over the timing of the Treasury’s decision to sell-down its 78% stake in RBS after the taxpayer has been left nursing a £1.08bn loss.
Mr Osborne defended the move, saying RBS needed to be returned to the private sector for the benefit of the economy and to help the bank rebuild itself.
The sale has reduced the Government’s stake in the group from 78.3% to around 72.9% and the £2.1 billion raised will be used to pay down Britain’s national debt.
A previous report by investment bank Rothschild said that if all of the Government’s stake was sold at current prices, the taxpayer would lose around £7bn, although some experts estimate the loss could be as much as £15bn.
The Government plans to sell around three-quarters of its holding in RBS by the end of the current five-year Parliament.
This first share sale comes after RBS in July reported better-than-expected figures for the first half of 2015.
While it swung into the red with interim losses of £153m after taking a £1.3bn hit for banking scandals, the bank’s second quarter figures suggested an improving picture, with attributable profits for the three months of £293m, up 27% year-on-year.