Analysts said the part-nationalised lender’s return to profitability was being hampered by falling revenues in the wake of moves to sell off its Citizens business in the US and scale back its investment banking operation.
By contrast, it is expected to be a more resilient performance from partly state-backed Lloyds, whose relatively minimal investment banking business means it is likely to be spared some of the volatility in the sector.
Ian Gordon, banking analyst at Investec, said: “I remain quite positive on RBS although it currently has ongoing profit margin erosion. They are taking a principled stand on abstaining from teaser rates, but it does mean their credit card balances are falling. On unsecured personal loans, RBS has decided they are not playing at ridiculous prices, which also reduces revenues.
“And among the UK domestic players RBS is the most positively geared towards UK interest rates rising, but they are not rising. I think McEwan’s gloss on it will be that we have to wait a bit farther out [for recovery].
“It is still involved in its big restructuring, and currently it is causing more pain to the revenue line than it is taking out in costs.”
The City forecasts Q1 income to have tumbled by nearly a third to £2.9 billion, also reflecting diminishing corporate deals, although RBS is less exposed now to investment banking, which accounts for only 15 per cent of the bank.
This Friday’s figures will also reveal the impact of RBS’s £1.2bn payment last month to the Treasury to buy out a key part of its £45bn bail-out.
First-quarter figures come after a tough 2015 that saw the group rack up its eighth consecutive year of losses. RBS, still 73 per cent owned by the taxpayer, posted a loss of £2bn in 2015, when it also warned shareholders that any restoration of the dividend would not be until at least after Q1 2017.
Analysts say Lloyds, which reports on Thursday, is likely to have seen Q1 profits fall to about £1.9bn from £2.1bn in the same quarter of 2015. Broker UBS says the performance overall is set to be “unremarkable but stable”.
Lloyds’s total bill for PPI (payment protection insurance) mis-selling is £16bn, but one analyst said he was not expecting any further hit in the quarter following a massive £2.1bn charge in Q4, 2015.
“I think there will be a breather, but I think Lloyds will add another £1bn in PPI charges by the time of the claims deadline in 2018,” one analyst said. Lloyds will also be quizzed on further job cuts in Q2 after 625 roles went in Q1.