HSBC Holdings plc (LON:HSBA) will tomorrow kick off a busy week of full year results from the UK’s biggest lenders.
The bank is expected to face questions over its boardroom succession plan almost a year after chairman Douglas Flint said the search for his replacement had started.
Last March the group said it planned to nominate a successor in 2017 but the timing would depend on identifying and securing an appropriate candidate. The new chairman will lead the process for selecting a new chief executive to replace Stuart Gulliver.
Hargreaves Lansdown said fiscal year 2016 should hopefully see the end to the group’s lengthy restructuring programme. With litigation also in the past, RBS has a platform from which it can grow, Hargreaves said.
“However, the bank’s turnaround has been a long one. Not so long ago it was targeting a return on equity of 10% in 2017, it was just 4.4% in the third quarter of 2016, so HSBC still has a long way to go," Hargreaves said.
“Dividend cover is also a concern at around 1.2x on consensus estimates for 2016.”
HSBC joins a slew of UK banks in reporting annual results this week with Lloyds Banking Group plc (LON:LLOY) to publish on Wednesday followed by Barclays plc (LON:BARC) on Thursday and Royal Bank of Scotland Group plc (LON:RBS) on Friday.
Anglo American plc (LON:AAL) also reports its full year earnings tomorrow with analysts expecting 2016 revenues of $22.5bn compared to $20.5bn the previous year. Total underlying earnings (EBITDA) are forecast to rise to $5.9bn from $4.8bn as the group offloaded unprofitable assets as part of a major overhaul.
Last Wednesday the miner said its Anglo American Platinum business, also known as Amplats, will swing to headline earnings of $126m in the year ended 31 December from a loss of $10m in 2015.
A day earlier, Anglo said its Kumba Iron Ore Limited business would contribute $438mln to annual underlying earnings, compared to $238mln in 2015.
Deutsche Bank said Kumba’s 2016 EBITDA was 3% higher than its forecast while Amplats was 2% higher. “We have increased our 2016 EBITDA forecast for Anglo by 3% to US$6.3bn, and our EPS forecast by 8% to US$1.76,” the bank said in a note to investors on Friday.
Away from corporate earnings, the UK public sector borrowing figures will be released by the Office for National Statistics.
Analysts expect a surplus of £13.0bn on public sector net borrowing, excluding banks, in January compared to a surplus of £12.6bn a year ago. Total public sector net borrowing is expected to rise to £13.5bn in January from £13.0bn a year earlier.
Last month’s ONS figures showed borrowing in the first nine months of the 2016/17 tax year fell 14.3% to £63.8bn compared to a year ago.
At the Autumn Statement in November, Chancellor Philip Hammond said he aims to cut the budget deficit for the current financial year by 10% to £68.2bn. The budget will be revealed on 8 March.
Howard Archer, chief UK and European economist at IHS Global Insight, said based on the first nine months of the fiscal year, on public sector net borrowing, excluding banks is headed for £64.6bn in 2016/17.
“While the latest public finance data suggest that the Chancellor could very well undershoot the revised fiscal targets contained in last November’s Autumn Statement, this is by no means guaranteed,” Archer said.
“Markedly higher inflation is pushing up government costs while higher interest rates are pushing up debt servicing costs. Furthermore, there was a surge in stamp duty receipts in the first quarter of 2016 as housing market activity was lifted by buy-to-let buyers and second home buyers rushing to beat a 3 percentage point rise in the stamp duty rate for those sectors.”
Significant announcements expected
Finals: Anglo American, HSBC, InterContinental Hotels Group plc (LON:IHG), Lighthouse Group plc (LON:LGT), Vitec Group plc (LON:VTC)
Interims: BHP Billiton Limited (LON:BLT), Galliford Try plc (LON:GFRD),
Trading statements: Safestore Holdings plc (LON:SAFE)