The stakes are high for the Royal Bank of Scotland, which is due to post a first-quarter interim management update on Friday. The group's share price has more than quadrupled in recent months with investors, emboldened by a series of better-than-expected updates from American banks, piling in on signs of stability in the sector. A positive update from RBS is likely to cement the optimism. Any suggestion of increased stress is expected to trigger an exodus from the stock, as traders move to bank profits.
Analysts are broadly positive, with Morgan Stanley's revised estimates expecting losses to narrow. The broker forecasts a net loss of £8.5bn, compared with a previous estimate of £15.8bn, for the current year, and £11.2bn, compared with £12.1bn previously, for 2010. Capital ratios are also expected to be stronger, thanks to the around £4.5bn pre-tax gain accrued via RBS's debt buyback . Although the extra cash falls outside the first quarter period, UBS, for example, predicts the gain will bolster the bank's regulatory capital base by around 100 basis points. "The market will be looking for more granularity on the assets being transferred into the UK government asset protection scheme, and on the cost reduction programme outlined by the company at the year-end results," UBS said.
TODAY: Assets under management at the fund manager Aberdeen Asset Management are forecast to have fallen to £103bn at the end of March, from £110bn at the end of December, according to Numis. "Overall, we do not expect Aberdeen to be immune to the challenging market environment, but we see better earnings momentum in the medium term from the synergies from [the deal to acquire certain fund management assets from Credit Suisse] which is expected to be completed by June 2009," the broker said.
Results/Updates: Xstrata, Aberdeen Asset Management.
TOMORROW: BAE Systems is expected to publish a trading update alongside its annual general meeting, which is due to be held tomorrow. Investors will be keen hear management's thoughts on recent US defence budget announcements, which have prompted optimism in the market, as the company stands to benefit from proposals to increase spending on projects such as the F-35 joint strike fighter programme.
Also tomorrow, Numis anticipates a robust update from Cobham, which is also in line to benefit from the Obama administration's defence spending plans. Although the group's shares have underperformed following a strong run last year, the broker recommends the stock for their promise of "sustainable growth and stable returns as the company continues to deliver on its defence and technology strategy".
Results/updates: Next, CRH, Sage, Provident Financial, Millennium & Copthorne, CSR, Cobham, BAE Systems.
THURSDAY: Barclays is forecast to post a positive first-quarter interim management statement. Expectations are high, with analysts waiting to hear whether Barclays Capital has managed to keep up with its American peers.
"The US investment banks' first-quarter results were very strong – Goldman Sachs posted revenues in the first quarter equivalent to the first three quarters of 2008 added together. JP Morgan's revenues were 1.5 times the first three quarters," Collins Stewart said in a preview published last week. "If we make the same sort of assumption for Barclays Capital, this lifts our revenue expectation from around £9bn to £13bn, which would improve group profits by near-50 per cent."
Also on Thursday, the outlook is likely to set the mood when Thomson Reuters posts first-quarter results. Deutsche Bank, which remains cautious ahead of the update, expects investors to focus on the extent to which revenue growth will slip in the quarters ahead, and the extent to which the company employs cost savings to mitigate the impact of sagging revenues.
"Our caution on the stock is a function of concerns that the revenue deceleration will be more severe than the market realises, that the margin implications of this are being underestimated and that while [the company's] positions in its markets are undoubtedly attractive, its markets themselves are materially less attractive in the new hair shirt era that the securities industry faces," Deutsche said, sticking to a "sell" stance on the company's stock.
Results/updates: Unilever, Diageo, RSA Insurance, Old Mutual, Vedanta Resources, Randgold Resources, Rexam, Mondi, Beazley, Thomson Reuters, Barclays.
FRIDAY: Results/updates: Inmarsat, RBS.