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Week Ahead: a tale of two banks

Our preview of the main financial events of the coming week.

 

by Chris Marshall on Feb 21, 2014 at 14:01

Week Ahead: a tale of two banks

Two of Britain’s biggest banks, Royal Bank of Scotland (RBS.L) and HSBC (HSBA.L), are set to provide very different perspectives on 2013 as they spearhead a week packed with major corporate updates.

RBS, the 81% state-owned bank that is the least-liked FTSE 100 stock among analysts, will report a pre-tax profit loss of some £7-8 billion, according to City estimates.

This is a bank that is still in recovery mode. According to press reports, alongside the year’s loss RBS will announce a major restructuring including a withdrawal from riskier investment banking activities.

Ultimately, many investors still deem RBS uninvestable.

HSBC on the other hand is a City favourite, well-liked for its management and balance sheet strength, not to mention a 5.1% dividend yield, which is tipped to rise further. It’s a top ten holdings for four out of five of the highly rated fund managers in Citywire’s Top Stocks share filter.

Buying opportunity?

That said, HSBC shares are down 11% over the past year, partly due to questions over the health of the Asian nations it targets. The bank is tipped as a buying opportunity after falling in line with other emerging markets-focused bank Standard Chartered. The City is expecting guidance on the impact of the recent EM turmoil, alongside a 2013 profit before tax of $24.7 billion, which would be a 20% rise on 2012.

As a reminder, of the other major banks Lloyds (LLOY.L) reported a £415 million profit for 2013, its first since the bank was part-nationalised six years ago. It also told investors that a resumption of dividend payments was on the cards, while preparations had begun for a sale of government shares to the public.

The political and regulatory scrutiny which still defines the investability of banks continues next week, with the Treasury Committee of cross-party MPs to take evidence on Tuesday on whether or not banks are lending to small and medium sized firms.

The banks report in a particularly busy week of corporate updates. Blue chips set to update shareholders on their progress in 2013 include troubled RSA Insurance (RSA.L) and Edinburgh-based Standard Life (SL.L) – which will reportedly use the occasion to warn about the perils of Scottish independence.

FTSE Diary

Monday: Associated British Foods trading statement, Bunzl earnings, HSBC earnings, Hiscox earnings, Bovis Homes earnings.

Tuesday: GKN earnings, Persimmon earnings, CRH earnings, Croda earnings, St James’s Place earnings, Capital & Counties earnings, Dechra Pharmaceutical earnings, Ashmore Group earnings, Ladbrokes earnings, Provident Financial earnings, Croda earnings.

Wednesday: Weir Group earnings, ITV earnings, Travis Perkins earnings, Petrofac earnings, Hays earnings, Segro earnings, Taylor Wimpey earnings, Restaurant Group earnings, Henderson Group earnings, Stagecoach interim management statement, CSR earnings, International Personal Finance earnings.

Thursday: Whitbread trading statement, WPP earnings, Reed Elsevier earnings, British American Tobacco earnings, Capita earnings, RSA Insurance Group earnings, RBS earnings, Standard Life earnings.

In addition, on Monday things start happening for investors who are in line for a windfall from Vodafone. The company’s share consolidation will take place, while investors will be credited with their shares in Verizon.  

Read this story for more details about how Vodafone’s subsequent cash hand-out will shape markets.

Of UK economic data, Wednesday’s second estimate of fourth quarter economic growth will count among the highlights, alongside more housing data. The preliminary stats showed GDP growth of 0.7% in the last three months of 2013.

Euro zone stimulus steps

Inflation data for February will be watched closely in Europe, a key gauge for investors attempting to work out whether the European Central Bank will use its March meeting to announce more measures to support the slow economic recovery.

Mario Draghi, the ECB’s chief, could also provide clues on the bank's next steps when he speaks in Frankfurt on Thursday.

Unlike the bad old days of the full-blown Eurozone crisis, recent political uncertainty has not deterred investors. Matteo Renzi is expected to be sworn in as Italy’s prime minister at the weekend.

Chilly in the USA, hot in Sydney

Freezing cold weather in the US – of which more is forecast for the coming week – has hit economic data reports so far this year, and next week’s durable goods report will probably show more of the same.

A second estimate of US fourth quarter GDP is also due on Friday. But economists are pencilling in a cut back from an initial annualised estimate of 3.2%.

In general economists reckon the US data will start improving again once the effect of the weather is statistically left behind.

Central bankers and finance ministers are escaping to sunnier climes though, with this weekend’s G20 meeting in Sydney where they’ll discuss financial regulation and stability.

In emerging markets, China’s January property prices are due on Monday, while a Brazilian interest rate decision is due on Wednesday.

1 comment so far. Why not have your say?

Micawber

Feb 22, 2014 at 07:06

You say that HSBC is a top ten holding "for four out of five of the highly rated fund managers in Citywire’s Top Stocks share filter. " which is correct.

You omit that in three of those four the manager has UNDERWEIGHTED HSBC I according to Citywire info.

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