Already the UK banking sector has suffered far sharper downgrades from analysts this year than global rivals.
Citigroup has cut its 2011 pre-tax profit forecasts for the sector by 42 per cent since the beginning of the year - a larger decline than any other market including the troubled eurozone economies of Spain and Italy.
The downgrades have been driven by a slump in UK banking revenues triggered by subdued recent trading volumes, particularly in banks’ capital markets divisions, and squeezed profit margins caused by higher funding costs.
While banks are taking aggressive action to counteract falling revenues with deep cost cuts - HSBC, Barclays and Lloyds Banking Group are together planning to strip almost £6bn from their cost bases over the next few years - analysts are braced for another weak set of results.
“Macroeconomic developments, the continued weakness of the operating backdrop and regulatory developments are increasing the likelihood of further downgrades to the second half of 2011 and 2012 consensus,” said analysts at Royal Bank of Scotland in a note to clients ahead of this week’s results announcements.
The chief executives of HSBC, Barclays and Lloyds, who all took up their positions earlier this year, will be under pressure to reveal more details on how they expect to meet performance targets laid out at a series of investor presentations in May and June.
First up will be Stuart Gulliver, the head of HSBC, whose efforts to save up to $3.5bn are expected to trigger up to 30,000 job cuts in coming years. Investors are braced for more details of the bank’s revised US strategy, including the expected sale of its branch network and cards business.
Analysts expect total revenue at HSBC to be flat at around $35bn, while pre-tax profit is forecast to be about $11bn, also roughly in line with last year.
After European rivals such as Credit Suisse and UBS posted dismal second quarter results last week, a big focus for Barclays and Royal Bank of Scotland will be how severely their investment banking divisions have been hit.
Analysts at Morgan Stanley expect second quarter revenues at Barclays Capital, due to be published with Barclays group results on Tuesday, to be about 15 per cent lower than in the first three months. Meanwhile, RBS’s investment banking arm could suffer a sharper decline of about 30 per cent due to its larger exposure to US mortgage backed securities, which were a particular weakness for US rivals.
Both RBS, which will announce results on Friday, and its state-backed rival Lloyds, due to present a day earlier, are expected to reveal deep losses following charges related to mis-sold loan insurance, high impairments in Ireland and continuing restructuring charges.
Lloyds’s net interest margin - the profit made on loans - is expected to narrow after the bank has continued to replace temporary government funding in the more expensive wholesale markets.
Better news should come from Standard Chartered, the emerging markets focused bank, which on Wednesday is expected to unveil a 10 per cent increase in pre-tax profit in spite of rising costs.
Related Post:
Financial markets
- forex trading asian session oct 24 2012
- Financial Services Firms In UK To Cut Jobs, Invest Less In 2012
- guardian prediction media business and advertising 2012
- Financial Market Potential 2012-2013
- Shanghai financial markets transaction volume forecast 2015
- infects US debt crisis on Financial markets in Europe and North America
- Yen and Swiss franc slide on U.S. debt deal August 1, 2011
- US stock futures and dollar rise on debt deal august 1 2011
- 30,000 jobs are expected to be axed at HSBC over three years
No comments:
Post a Comment