Market braces for banking results bonanza
City to look for signs of impending job cuts after redundancies at Credit Suisse and UBS
Sunday 31 July 2011
The City will pore over a mixed set of interim results from the big five listed UK banks this week, looking for signs of potential job cuts and the impact of the eurozone crisis.
Investors will be concerned that investment banking divisions could shrink, after Credit Suisse and UBS announced 7,000 redundancies between them last week. HSBC's chief executive, Stuart Gulliver, has been reported to be looking for 10,000 job cuts as part of a programme to save up to $3.5bn (£2.13bn) a year, though it is thought that he will not confirm them at tomorrow's results briefing.
Michael Trippitt, head of research at Oriel Securities, said he would be looking at the HSBC's level of writedowns, or impairments in North America and the quality of its loans in Europe. Analysts expect pre-tax profit for the overall group to be around $11bn for the first half, boosted by growth in emerging markets in Asia. Although US write-downs are still likely to be a little over $3bn, this would only be two-thirds the figure of last year.
The US sub-prime mortgage lender Household International, which HSBC bought in 2003, has been a severe drag on the bank's performance. But the decision in 2009 to halt Household's consumer lending is expected finally to bear fruit. JP Morgan has warned that the investment banking division is only likely to contribute $839m of pre-tax profit, down from $2.09bn in the same period last year.
Mr Trippitt said that across the big five banks, he was looking to see whether the crisis in Greece, Ireland and Mediterranean economies had increased their cost of borrowing. He will also be keeping a close eye on warnings that customers are defaulting on their loans. "In terms of broader trends, it will be important to see what impact European sovereign risk has had on the cost of funding," he said. "And we will look for any further detail on consumer asset quality."
Barclays follows HSBC on Tuesday. The investment banking division, Barclays Capital, has helped steady the group during the financial crisis, but analysts at Shore Capital think that the division will not be such a source of strength this time around.
In a preview note, Shore said that it expected BarCap to provide around £2.8bn to £3bn top-line income against £3.3bn in the first quarter.
The note added: "Read-across from the US and European investment banks that have reported so far [Goldman Sachs, Morgan Stanley, Bank of America, Citigroup, JP Morgan, UBS, Deutsche Bank and Credit Suisse] suggests to us that there may be some downward pressure on consensus BarCap revenue and profit forecasts."
On Wednesday, Shore expects Standard Chartered to announce pre-tax profit of around $3.5bn, up from $3.1bn in the first half of 2010. Market guidance from the bank earlier this year suggested that cost growth as a result of inflationary pressure in Asia had been kept under control.
Lloyds shares have been badly hit in 2011, after first-quarter results were hurt by the decision to set aside £3.2bn to cover probable liabilities from the payment protection insurance mis-selling scandal. However, Keefe, Bruyette & Woods expects second-quarter pre-tax profit before exceptional costs to be £1.1bn. Losses in Ireland and Australia, although still high at £2.2bn, will be £1.4bn lower than the second half of 2010.
Finally, RBS reports on Friday. It is thought the bank will show overall business lending is up, though this will be driven by increased borrowing from bigger corporates.
Missing Malaysia Airlines Flight MH370: Wreckage could be found within a week as search reaches 'very critical juncture', says minister
South Korea ferry disaster: Released transcripts show chaos and confusion in the moments before ferry sinks
Unbeliebable: The White House offer 'no comment' to anti-Justin Bieber petition
Loch Ness Monster found on Apple Maps?
South Korea ferry disaster: Families watch as remains of Sewol victims returned to shore
The food poverty scandal that shames Britain: Nearly 1m people rely on handouts to eat – and benefit reforms may be to blame
Scottish independence: It is the English who should be on their knees, begging the Scots to vote ‘No’
'Sinful': Video of British Muslims dancing to Pharrell Williams's hit Happy comes under attack
Nigel Farage: I’m taking on the status quo, and the Establishment’s fighting back
Abdullah Deghayes: My son was the martyr of a just cause, says father of British teenager killed in Syria conflict
Ukraine crisis: Helicopter gunships take country closer to all-out war
- 1 Jose Mourinho: Graceless reaction of Chelsea manager a sad effort to hide his own flaws
- 2 A bottle of wine a day is not bad for you and abstaining is worse than drinking, scientist claims
- 3 Unbeliebable: The White House offer 'no comment' to anti-Justin Bieber petition
- 4 Loch Ness Monster found on Apple Maps?
- 5 Shropshire criminals ‘using unmanned drones and infrared cameras to find illegal cannabis farms’ – and then steal from the growers
iJobs Money & Business
Negotiable: Harrington Starr: Database Team Lead ( Leadership, Sybase, Compute...
£40000 - £50000 per annum + Bonus+Benefits+Package: Harrington Starr: C#.NET D...
£25000 - £35000 per annum + Bonus+Benefits+Package: Harrington Starr: VB.NET S...
£45000 - £55000 per annum + Bonus and Benefits: Harrington Starr: Trade Suppor...