Royal Bank of Scotland Group PLC (LON:RBS) will exit the summer closer to returning to private hands, thanks to June’s government sold off a tranche of taxpayer-owned shares.
The government sold a 7.7% stake, reducing its holding to 62.4% after the lender reported its first annual profit in a decade in February and settled a US investigation into the mis-selling toxic mortgage-backed securities in May.
The US$4.9bn penalty with the US Department of Justice to settle the investigation was much lower than estimates around US$12bn and put to rest the lender’s largest legacy issue.
RBS reports its interims on Friday and will take a US$1.44bn charge related to the fine after setting aside US$3.46bn ahead of the settlement.
With the DoJ fine out of the way, investors are now turning their attention to the progress of the bank’s restructuring and the tIMIng of the resumption of dividends.
“The CEO's restructuring plans will shrink the group further through to 2020 and will shift its business towards retail and commercial banking,” said Graham Spooner, Investment Research Analyst at The Share Centre.
UBS expects RBS to report second-quarter adjusted pre-tax profit of £1.3bn, down from last quarter’s £1.4bn.
Strikes and overcapacity to hit IAG
Last month’s traffic and capacity update for British Airways-owner International Consolidated Airlines Group PLC (LON:IAG) made for good reading, with passenger numbers and load factors both up sharply across all of its airlines.
The issue for the sector has been overcapacity though, meaning companies have had to slash their prices just to get people on board and remain competitive. That has weighed on IAG shares, which are down more than 8% over the past six weeks.
Air traffic control strikes are also likely to have had an impact on the firm’s second quarter, particularly within its Vueling division.
With margins taking a bit of knock of late, fuel and staff costs will be keenly eyed, although IAG said it managed to keep those under control in its Q1 update back in May.
Away from its own performance, the market will hope to see some commentary on its acquisition plans, with rumours repeatedly suggesting another bid for Norwegian Air might be forthcoming.
Friday August 3
Interims: Royal Bank of Scotland Group (Q3) (LON:RBS), International Consolidated Airlines Group PLC (LON:IAG), Cobham PLC (LON:COB), Mondi Plc (LON:MNDI), Essentra PLC (LON:ESNT), William Hill plc (LON:WMH)
Economic data: UK services PMI; US non-farm payrolls; US international trade; US ISM non-manufacturing; US manufacturing PMI