Royal Bank of Scotland Group PLC (LON:RBS) will wrap up the week with its third quarter trading update on Friday.
The lender posted its first half-year profit in three years in August as it cut costs as part of its ongoing restructuring.
However, RBS remains more than 70% owned by the government following its 2008 bailout as it wrestles litigation and conduct charges.
Following a £4.2bn payment to the Federal Housing Finance Agency in July to settle claims it mis-sold billions of dollars’ worth of toxic mortgage-backed bonds in the lead up to the financial crisis, RBS is facing a bigger fine from the US Department of Justice.
Subject to remaining legacy issues, RBS expects it will return to an annual profit in 2018.
Investors will be looking out for any changes to its guidance in the quarterly update as well as its progress in its restructuring. They may also want to hear further remarks on the lender's plans to set up a fund for challenger banks – a deal with the European Commission to get out of having to sell its Williams & Glyn under the conditions of its government bailout in 2008.
IAG to report quarterly revenue and earnings growth
The airline sector has taken some stick this year but IAG (LON:IAG), owner of British Airways, has flown above it all.
Ahead of third quarter results on Friday, the stock is up 47% year-to-date, helped by its focus on long-haul routes and the corporate market.
Most of the real vicious competition has taken place in the short-haul leisure market, resulting in the demise of the likes of Monarch Airlines and Air Berlin, and profit warnings from the likes of Flybe.
HSBC, which has a ‘reduce’ rating on IAG, expects the focus to be “revenue trends into the winter, aeropolitical issues around Brexit, broader economic and political issues in Spain, and IAG’s views on the recent industry consolidation”.
On the other hand, the company holds its capital markets day a week later so it may keep some powder dry in terms of commentary.
HSBC is forecasting a revenue per available seat kilometre (RASK) of 1.0%.
Cost per available seat kilometre (CASK), excluding fuel, is tipped to rise by 0.5% but including fuel CASK is forecast by HSBC to drop by 1.4% year-on-year, helped by a 6% drop in the fuel bill.
HSBC forecasts underlying earnings before interest and tax of €1,378mln, up 14% year-on-year, making it some way below the consensus forecast of €1,395mln.
Sales on the way at Shire?
Given the recent reports that activist US hedge fund Sachem Head Capital Management is demanding a string of divestments at Shire Plc (LON:SHP), the druggie’s third quarter trading update on Friday should be interesting.
Any news on potential sales will be keenly eyed, with Morgan Stanley suggesting the neurosciences business could be offloaded in the near future.
Shire’s stock has struggled ever since it completed the US$32bn acquisition of Baxalta last January, but analysts at the US investment bank think that could start to change soon.
They’re looking for an update on synergies from the manufacturing network in the update, which would help to ease some of the pressure that has built since the addition.
Also of interest will be Shire’s haematology franchise, which is being disrupted by Roche’s ACE910 treatment, although MS still reckons there’s a place for Shire’s Advate and Adynovate drugs though.
Elsewhere, Shire recently announced the surprise departure of its chief financial officer Jeff Poulton, who will depart at the end of the year. Look out for an update on how the search for his successor is coming along.
Significant events expected on Friday 27 October:
Trading updates: Berendsen PLC (LON:BRSN), Elementis PLC (LON:ELM), Hastings Group Holdings PLC (LON:HSTG), Inchcape PLC (LON:INCH), Royal Bank of Scotland Group PLC (LON:RBS), Shire Plc (LON:SHP), International Consolidated Airlines Group PLC (Q3) (LON:IAG)
Interims: System1 Group PLC (LON:SYS1), Berendsen (LON:BRSN)
Economic data: Nationwide UK house prices; University of Michigan US consumer sentiment report