Mixed fortunes in prospect for banks

By GARETH MACKIE
Published on 29/10/2012 00:00

The banking sector will be in the spotlight this week as the third-quarter reporting season kicks off with figures from Barclays, Lloyds and Royal Bank of Scotland.

Barclays gets the ball rolling on Wednesday, and new chief executive Antony Jenkins is expected to unveil adjusted pre-tax profits of £1.7 billion for the three months to 30 September, up 27 per cent on the same quarter in the previous year. However, the group will take an additional £700 million hit for covering the cost of mis-sold payment protection insurance (PPI) claims.

Lloyds also faces a hefty PPI bill, with analysts at Credit Suisse pencilling in a £1.5bn third-quarter hit for the part-nationalised bank, which posts its results on Thursday. Investec has forecast a pre-tax loss of around £800m, up from £600m a year ago, although underlying profits are expected to have risen once one-off items are stripped out.

Fellow bailed-out lender RBS is predicted to report a £1bn bottom line loss on Friday, against a £100m deficit in the previous three-month period. At the underlying operating level, Investec analyst Ian Gordon is expecting a £697m profit, ahead of the £650m seen in the second quarter. As well as driving up profits at its core businesses and driving down bad debts, RBS recently exited a state-backed insurance scheme covering its poorer-quality assets. RBS will save £1.4m a day from leaving the Asset Protection Scheme, having paid £2.5bn since signing up February 2009.

David Nish, chief executive of Standard Life, is expected to report further growth in assets on Wednesday when the life and pensions giant updates the market on its third-quarter trading performance. The Edinburgh-based group is seen by analysts as one of the companies best-prepared for new rules that will ban the payment of commission to advisers which sell their products, and recently unveiled a five-year distribution agreement with RBS.

Fashion and homewares chain Next, which recently reported a 10 per cent increase in first-half profits, also updates investors on Wednesday, and brokers at Panmure Gordon expect a 14 per cent jump in online sales for the three months to October, although sales across its 540 stores are predicted to have risen just 1 per cent.