It’s been a busy week for the big banks, with the likes of HSBC Holdings PLC (LON:HSBA) and Standard Chartered PLC (LON:STAN) already reporting their interim results.
All eyes in the sector now turn to tomorrow’s numbers from state-owned lender Royal Bank of Scotland Group PLC (LON:RBS).
If today’s share price reaction is anything to go by – up 2% so far – then the results could surprise on the upside.
Restructuring and misconduct costs will be the prime focus of the taxpayer-rescued bank’s first half results and investors will be hoping to see some light at the end of the tunnel.
In the first three months of the year, RBS reported its first quarterly profit since the third quarter of 2015 as it cut costs.
Its so-called “bad bank” has seen risk weighted assets fall to £30.5bn and it has put some of its past misdemeanours behind it with the recent £4.2bn settlement with the US Federal Housing Finance Agency for mis-selling of mortgage securities.
RBS is facing another penalty from the US Department of Justice over the loan mis-selling scandal.
It has also agreed to pay £835mln as part of its proposal to set up a fund for challenger banks to avoid having to sell its Williams & Glyn division. The European Commission has accepted the plan “in principle” but still requires the approval of the European College of Commissioners.
RBS has already set aside £750mln for the scheme to help smaller ‘challenger’ banks and will have to stump up a further £50mln, which will be recorded in the first half, plus £35mln in running costs.
Market expectations are for a quarterly profit in the region of £300mln at the lower end of expectations to as much as £1bn, to be added to the £259mln profit we saw in the first quarter.
Impact of terror attacks in focus at Merlin
Alton Towers owner Merlin Entertainments PLC (LON:MERL) also reports its interims on Friday, with consensus suggesting a 3.5% uplift in like-for-like sales to give underlying earnings of £142mln and profit before tax of £50mln for the period.
Given that those numbers are fairly well-flagged and the fact that more than a third of total revenues are generated in July and August, the focus will be on current trading.
Midway – the division that houses Madame Tussauds and the London Eye among others – will be under the spotlight with analysts suggesting that the recent terror attacks could impact visitor numbers.
On the flipside, Barclays reckons those attacks have encouraged more Brits to take a ‘staycation’ this year which should be a positive for Merlin’s various theme park resorts.
US jobs data also in focus
Away from UK companies, job numbers across the pond will also be in focus tomorrow and should provide further clues on the outlook for interest rate rises.
Analysts are forecasting that 180,000 or so jobs were added to the payroll last month, down on the 222,000 added in June.
The unemployment rate is expected to remain at near 17-year lows at 4.3% - down from 4.4% in June.
Significant events expected:
Interims: Kennedy Wilson Europe Real Estate PLC (LON:KWE), Merlin Entertainments PLC (LON:MERL) Royal Bank of Scotland PLC (LON:RBS), RPS Group PLC (LON:RPS)
Trading updates: S&U PLC (LON:SUS)
Economics: US July non-farm payrolls, average earnings