Royal Bank of Scotland and Lloyds Banking Group will announce their 2009 results this week, but analysts predict both are some way from profitability. The two British giants, both of which have been propped up by the Government, are expected to be overshadowed by Barclays' stellar results from last week, which helped drive the stock up almost 20 per cent since the start of the week.
Barclays posted a full year pre-tax profit of £11.6bn, while RBS and Lloyds are expected to make a pre-tax loss of £6bn and £8bn respectively, according to City brokerage Charles Stanley. RBS saw a marked decrease in losses between the second and third quarters of 2009 as operating losses fell to £1.5bn from £3.5bn. Impairments at the bank, although remaining high at £3.2bn, also improved in the quarter.
"The market will be looking to see whether the positive news regarding RBS's capital position, a stabilising net interest margin and its improved cost income ratio continued in the final quarter of 2009," the broker said. But even if the worst is over, RBS will remain "a challenging investment before 2014 to 2015" based on the group's current earnings profile and share count, UBS said.
In contrast, the Swiss group predicted that Lloyds would return to profitability later in 2010, aided by an improved outlook on impairments, which in the third quarter stood at £5.2bn compared with £13.4bn in the first two quarters of the year. "We expect FY09 results to show the improving market trends and a better impairment picture which should reduce market concerns," said UBS.
Today: Results/updates: Albemarle & Bond Holding, Associated British Foods, Bunzl, Hammerson, Petra Diamonds, Waterman Group, XP Power.
Tomorrow: Results/updates: Brammer, Croda International, Dechra Pharmaceuticals, Drax Group, Elementis, Lighthouse Caledonia ASA, Minerva, Mondi, Morgan Sindall, Spectris.
Wednesday: Analysts are negative ahead of homebuilder Barratt Developments' interim results. Investec called Barratt the riskiest stock in the housing sector, while Numis pointed out the company was the second-worst sector performer. To round things off, UBS predicted that the company would suffer a pre-tax loss of £53m. Barratt was hit hard by the downturn due to its high debt level and significant spending commitments. Headline net debt peaked at £1.8bn in December 2007, from £277m net cash in June 2005. But the firm has since made serious efforts to reduce this number, analysts said.
Results/updates: Barratt Developments, Galliford, Henderson Group, Huntsworth, Jazztel, Kier Group, Logica, MJ Gleeson Group, Moneysupermarket.com Group, Mucklow A&J Group, Rathbone Brothers, St James's Place, Town Centre Securities, Travis Perkins.
Thursday: A slightly happier tale in the construction sector can be told of Redrow, which "represents to us a classic turnaround story," according to Investec. Steve Morgan, the founder of Redrow who left in 2000, returned as executive chairman last March and has redirected the firm towards its core strengths and made efforts to repair the balance sheet. But Morgan faces a near Herculean task,
Redrow was the hardest-hit housebuilder during the downturn in terms of operational performance, Numis said, but nonetheless its share performance has almost mirrored rival firms, including Barratt, because "the stock market has chosen to back Steve Morgan". Despite market support for leadership, the underlying returns of the business will only improve slowly and will lag behind other firms, the broker added.
It said: "Redrow will be the slowest housebuilder to recover as the low returns and poor cash dynamics from landholdings will reduce the amount of new land bought and the ability to pull it through to production."
Energy provider Centrica is expected to record an operating profit of £1.8bn for 2009, down 7 per cent from £1.94bn actual profit in 2008, according to analysts' consensus group forecasts.
Results/updates: Ashmore Group, BBA Aviation, British American Tobacco, Capita Group, Centrica, Communisis, Dunelm Group, Ensco International, Filtrona, Genus, GKN, Go-Ahead Group, Hays, Hunting, London Capital Group, Rank Group, Redrow, Royal Bank of Scotland Group, RSA Insurance Group, Segro, Sinclair Pharma, STV Group, Venture Production, Wilmington Group, WYG, 4imprint Group. Friday: Results/updates: Brit Insurance Holdings, Centaur Media, Colt Telecom Group, Crew Gold Corp, Davis Service Group, Helphire, Lloyds Banking Group, Minorplanet Systems, Ricardo, Rightmove, Serco Group, Test2-Earnings, William Hill.