Week Ahead

NatWest’s profits haul sets tone for rival banks

Barclays Glasgow campus
Barclays’ campus in Glasgow

Following NatWest’s sparkling results on Friday, market attention will focus on whether rival high street banks Barclays, HSBC and Lloyds will put in a repeat performance.

NatWest reported pre-tax profit of £6.2 billion, up 20% on £5.1bn last time. It is the biggest profit haul since the bank’s rescue in 2008.

Barclays (Tuesday) will accompany its year-end figures with a strategic review of the business and a need to reduce costs. Its cost-income ratio currently sits well above its peers.

Its investment banking division will almost certainly reflect weakness in the M&A market, though there are signs that deal flow is gathering pace on the back of anticipated interest rate cuts.

Barclays shares are down by more than a fifth in the past year even though it enjoyed a good year. Analysts at AJ Bell say is expected to earn £6.7 billion pre-tax, “only a fraction less than it earned in the go-go glory days of 2006 and 2007.”

Lloyds (Thursday), being the closest structurally to RBS, is expected to put in a similar showing after a decent third-quarter. It was the only major UK bank to see underlying profit before tax improve from the prior quarter.

HSBC (Wednesday) has other issues to concern it. Its focus on Asia means it has to deal with the fallout of the Chinese property crash on its Kong Kong-based operations. It is expected to publish a three-year plan.

There are first half results from Elgin-based housebuilder Springfield Properties and an update on its return to the affordable sector will be of interest.

Engine maker Rolls-Royce is expected to report a doubling of profits to £1.4 billion on Thursday following a turnaround plan led by Tufan Erginbilgic who became CEO a year ago.

The profits boom comes three months after Erginbilgic unveiled a strategy to quadruple earnings within five years. 

Rolls-Royce came close to bankruptcy during the pandemic as aircraft orders dried up, but it the was the FTSE 100’s biggest riser in 2023, with its share price soaring more than 200% in its best year since its 1987 public listing.

The turnaround has come at a price with plans to cut 2,500 jobs, or 6% of its workforce.

The latest consumer confidence data on Friday will follow a surprise uplift in spending in the shops and the UK’s slide into recession, though it may come too soon to accurately measure either trend.

Also on Friday, Scotland’s Wellbeing Economy, Net Zero and Energy Secretary Mairi McAllan will address business leaders at a Prosper event in Edinburgh where she will be quizzed on her government’s record.

DIARY

Monday 19 February

  • Full-year results from MoneySuperMarket
  • Rightmove UK house price index

Tuesday 20 February

  • Full-year results from Antofagasta and InterContinental Hotels

Wednesday 21 February

  • Full-year results from HSBC, Rio Tinto, BAE Systems and Glencore
  • First-half results from Springfield Properties
  • UK government borrowing

Thursday 22 February

  • Full-year results from Lloyds Banking, Rolls-Royce, Anglo American, WPP
  • Trading update from Tate & Lyle
  • EU inflation

Friday 23 February

  • Full-year results from Standard Chartered and Mondi
  • GfK UK consumer confidence


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