The Week Ahead: Investors hope for better outlook from banks

The banking sector is set to dominate the headlines again this week, with Royal Bank of Scotland and Lloyds Banking Group due to report full-year results on Thursday and Friday respectively.

The main figures have been aired already: RBS posted a trading update in January, warning investors that it may end up with losses of as much as £28bn, while Lloyds, which issued an update this month, expects its HBOS unit to report a loss before tax of some £10bn. The Lloyds TSB division is expected to remain in the black, with £1.3bn in pre-tax profits.

With much of the bad news already priced into the respective share prices, outlook statements are likely to play a key role in shaping the market’s response.

Stephen Hester, the RBS chief executive, also promises to attract attention as investors seek clues about the thrust of cost-cutting initiatives and, in light of news that the bank is looking to sell certain Asian and American assets, about progress with disposals.

For Lloyds, UBS analysts expect the market to seek more clarity about the factors that drove the £7bn of impairments on the HBOS corporate book and the £4bn of writedowns attributed to “market dislocation”.

Looking ahead, the broker said: “The key question will be how the group intends to position itself in the gross mortgage market. Through a combination of its legacy book (around 10 per cent of the market), HBOS’s legacy book (around 23 per cent of the market) and access to maturing Northern Rock business (around 7 per cent), Lloyds Banking Group has access to about 40 per cent of the mortgage market.”

Today: Results/updates: Associated British Foods, Fresnillo, Bunzl.

Tomorrow: Evolution Securities is expecting news of robust profits from Ashmore, the investment manager, which is due to publish interim results. The outlook, according to the broker, “is less good” owing to weaker performance fees, lower average funds under management and more net outflows. Yet Evolution advises investors to look through the gloom, highlighting the strength of the company’s balance sheet and low fixed costs. “The broad uplands may not be close, but they are definitively sunlit,” the broker said.

Results/updates: Thomson Reuters, Dechra Pharmaceuticals, Morgan Sindall, St James’s Place, Spectris, Redrow, Ashmore.

Wednesday: Results/updates: Cadbury, Logica, Bodycote, Barratt Developments, A&J Mucklow.

Thursday: National Express is due to post full-year results, and according to Citigroup, any news on current trading and the outlook for the business in Spain and in the UK is likely to be key in shaping the market’s reaction.

“We believe the National Express portfolio includes the potential for further efficiencies from closer integration and a differentiating ability to extract revenue synergies between units that offer substantial long-term upside,” the broker said in a recent preview note. “However, [the company] must first overcome major challenges, particularly in UK rail.”

Also on Thursday, UBS expects British Gas owner Centrica’s preliminary results to reveal £1.94bn in pre-tax profits, with 22.3p in earnings per share. “Customer numbers within the UK and US supply business will be an area of focus given the strong movement in commodity prices seen last year,” the broker said. “In addition, guidance [regarding] gas production for the coming year will be of interest.”

Results/updates: British American Tobacco, Trinity Mirror, Bluebay Asset Management, Capita, Hunting, Genus, Liberty International, Hays, Rank, BBA Aviation, Dunelm, Filtrona, Centrica, National Express, Royal Bank of Scotland.

Friday: There should few surprises in Hardy Underwriting’s final results, according to Numis Securities. The Lloyd’s of London insurer has already pointed to pre-tax profits of not less than £22m, and the broker expects news of one of the strongest performances in the sector.

“With 2008 numbers largely pre-reported, the trading outlook is likely to be the main area of focus,” Numis said, adding that the key question was “how much premium growth the current balance sheet can support before additional funds are needed”.

Also on Friday, the consulting group White Young Green is due to post interim results, with Panmure Gordon forecasting £7.2m in adjusted pre-tax profits, compared with the £9m reported last year. Earnings per share are predicted to fall by 29.5 per cent to 9.6p.

Results/updates: William Hill, Davis Service, Rightmove, Charter, Hardy Underwriting, Lloyds Banking Group.