HSBC is boosted as the banks 'reform'
Tuesday 07 May 2013
After a lengthy stint in the stocks, the big banks started to edge back into favour last week. Signs that their cost-cutting is paying off and they might actually be reformed characters may have even stopped people hating them quite so much.
Barclays, Royal Bank of Scotland and Lloyds revealed some signs of recovery, with a less brash and more boring way of doing business. Today it is HSBC's turn. Banking expert Ian Gordon at Investec thinks HSBC is "finally about to get serious on costs" and he said he feels "uncharacteristically positive ahead of first-quarter results".
Mr Gordon admits he predicts HSBC will miss financial benchmarks such as its 12 per cent return on equity target, but he does expect pre-tax profit to be at $6.6bn (£4.2bn), ahead of the $6.4bn for the same quarter of 2012.
He thinks the cull of 3,000 UK jobs as a "precursor to fresh initiatives at the strategy day on 15 May" is "welcome". He rates it a buy with a 735p price target.
Results/Updates: Aer Lingus, Betfair, CRH, easyjet, EOG Resources, HSBC, Hiscox, Iofina, Macfarlane Group, National Express, Numis, Prudential, Quindell Portfolio, Telecity.
Sainsbury's chief executive, Justin King, has been talked about more than the £7bn supermarket empire he controls recently. Investors will want to hear more from Mr King on his future plans. there have been rumours he will leave after 10 years at the business next year.
But more pressing are the group's expansion ideas. Will it ditch plans for new big shops in favour of online and convenience stores?
Analysts at Jefferies conclude the group has had a good year with pre-tax profits coming ahead of forecasts at £757m. The finals on Wednesday will show what a good year it has had, but Jefferies only rates the shares a hold with a 330p price target as there are "greater-than-expected UK consumer and competition headwinds".
Results/Updates: CSR, Costain, CRH, Drax, Ecofin Water & Power, esure, Galliford Try, InterContinental Hotels, Fidessa Group, Intu Properties, Next, Resolution, Rightmove, Sage, Sainsbury's, Standard Chartered, Tullow Oil, JD Wetherspoon.
SuperGroup, the owner of the Superdry clothing label, is expected to reveal a solid fourth quarter, proving that momentum from the third quarter has continued. After a series of self-inflicted wounds Kate Calvert at Cantor Fitzgerald thinks it will be able to "push ahead with the development of the brand on the internet and overseas". She rates the brand a buy with a 750p price target because the shares "remain undervalued" as they trade at 12.5 times 2014 earnings compared with a sector average of 13.8.
Results/Updates: Experian, Barratt Developments, Beazley, Eurasian Natural Resources, Hammerson, Hardy Oil & Gas, IMI, Kingspan, London Mining, WM Morrison, Old Mutual, Pantheon International, Provident Financial, Spirax-Sarco Engineering, SuperGroup, Titon Holdings, Tullett Prebon, TT Electronics, United Drug.
Shareholders may have got a bit confused last week when it came to BT. Do you hang up your shares or not? Morgan Stanley last week advised clients to avoid BT ahead of the full-year results today. It was concerned that "regulatory pressures" were mounting and thinks the rising pension deficit – now estimated at £6bn, up from £2.4bn in 2011, is a big issue. Morgan Stanley thinks BT's annual payments to pensioners will rise above £2bn a year from 2015. Last month BT's shares hit their highest since 2007, and analysts at Liberum Capital rate the shares a buy. They think BT, which has launched a sports TV channel featuring presenters including Clare Balding, pictured below, will manage to "deliver significant further cost-saving, achieving top-line stability and medium-term capex reductions" and rate the shares a buy with a 315p price target.
They say "don't be put off by the pension deficit" as the next actuarial review results will not be until March 2015 and "there is considerable scope for fluctuations in the fundamental drivers before then".
Results/Updates: BT, Catlin, Derwent London, Ferrexpo, Morgan Advanced Materials, TUI Travel.
Today British Retail Consortium shop price index, new car registrations, Halifax house prices, Lloyds employment confidence survey.
Tomorrow British Retail Consortium like-for-like sales figures.
Thursday Industrial production data, manufacturing production data, Bank of England interest rate announcement, Bank of England asset purchase target, National Institute of Economic and Social Research GDP estimate for April, Bloomberg May UK economic survey, ECB monthly bulletin and US unemployment count.
Friday Trade figures, construction output data, G7 meetings and US federal budget balance.
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