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PPI still lingers over Britain’s banks ahead of Q3 results period

Analysts at Deutsche Bank said they will be keeping a close eye on the fallout from the misselling scandal, which has already cost some banks billions in compensation claims

Barclays - PPI still lingers over Britain’s banks ahead of Q3 results period
RBS will be the first major bank to report its Q3 results next Thursday

With five of the UK’s major banks due to report their third-quarter results before the end of the month, the fallout of the payment protection insurance (PPI) scandal is likely to hold focus.

In a note on Thursday, analysts at Deutsche bank said charges relating to PPI mis-selling would be closely eyed in the numbers of Barclays PLC (LON:BARC), HSBC Holdings PLC (LON:HSBA), Lloyds Banking Group PLC (LON:LLOY) and Royal Bank of Scotland Group PLC (LON:RBS).

Some of the banks have already received large bills for mis-selling PPI to unsuspecting customers, with Lloyds alone having to cough up nearly £2.5bn, forcing the bank to suspend its share buyback programme.

READ: Lloyds suspends share buybacks after surge in PPI claims result in further hit of up to £1.8bn

The only bank to avoid the same fate was Standard Chartered PLC (LON:STAN), as it does not have a retail banking operation in the UK.

Away from PPI, Deutsche said they expected the UK’s domestic banks to see “further pressure” on their net interest income (NII) and margins, although it would be partly offset by volume growth.

However, analysts said the key focus was likely to be on both the outlook for net interest margins (the difference between the interest income generated by a bank versus the amount paid out to lenders) and any newsflow surrounding the ongoing Brexit process.

There was one silver lining for HSBC and Standard Chartered in the form of a higher Hong Kong Interbank Offered Rate (HIBOR), which was likely to support NII from the two firm’s operations in the city, although Deutsche questioned how long this would last.

RBS will report its Q3 results on 24 October, with Barclays, HSBC, Standard Chartered and Lloyds to follow on 25 October, 28 October, 30 October and 31 October respectively.

In late-morning trading on Thursday, RBS shares were up 2.2% to 234.8p, Barclays was 3.1% higher at 169.3p, HSBC moved up 1.2% to 611.1p, Standard Chartered ticked up 0.2% to 659.6p and Lloyds rose 2.2% to 62.4p.

Quick facts: Barclays PLC

Price: 94.7256 GBX

Market: LSE
Market Cap: £16.43 billion

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