RBS and Next results set to give insight into Brexit impact

Profits updates from RBS and Next will give the City some idea of the impact of EU Leave vote. Picture: John Devlin

Royal Bank of Scotland posts its half-year results on Friday, with the City keeping a close watch for Brexit warnings or concerns over how ultra-low interest rates could hit its performance.

The taxpayer-backed bank is expected to book underlying pre-tax profits of £1.016 billion for the second quarter, with total income slated to come in at £3.15bn for the same period, according to consensus figures.

Although the update comes too early to gauge the impact of the referendum result, City experts will be looking for any detail as to how the Brexit vote may affect plans to shore up its financial performance in the long-term.

Michael Helsby, research analyst at Bank of America Merrill Lynch, said RBS may be forced to slash costs even further if the Brexit vote triggers a fresh independence referendum in Scotland.

He said: “Post Brexit we worry that RBS’s strong management focus and delivery will be hampered as rates are cut, bad debts rise and volume growth is limited. The cost lever is already being pulled hard, but with the possibility of a Scottish referendum in the background it may not be able to be pulled harder.”

The announcement will come hot on the heels of results updates from Lloyds Banking Group and Barclays this week, which have both warned of the mounting risks caused by Britain’s vote to leave the European Union.

Lloyds said on Thursday that Brexit could have an adverse impact on its future performance, as it slashed 3,000 jobs and shut 200 branches and braced itself for a cut in interest rates.

It was followed by concerns from Barclays on Friday, which said if Brexit negotiations end with the UK’s financial sector losing “passporting” rights, it would require the bank to make “alternative licensing arrangements in EU jurisdictions” where it operates.

RBS chief executive Ross McEwan issued a memo to staff in the days after the referendum result, saying the vote to leave the EU would create “short, medium and long-term” economic uncertainties. Mr McEwan also moved to reassure employees that RBS is well placed to deal with the fallout.

Retailer Next is expected to report another plunge in sales next week as difficult trading and increased costs following the collapse in sterling begin to take their toll on the firm.

City analysts expect like-for-like sales at the chain’s high street shops to plummet up to 8.3 per cent in the second quarter.