Big 3 Banks UK 8216 Big Oil 8217 earnings in focus next week

UK banking and ‘Big Oil’ will be two major watch points for investors next week as the British oil  supermajors and the biggest UK-focused banks release earnings.

From investors’ point of view, the biggest British lenders are in rude health.

Whilst their comeback is incomplete and has not been painless, recent data showed dividend pay-outs back near pre-crises highs.

The sustainability of these increases depends on continually improving earnings.

• Barclays will release H1 earnings on Wednesday 29th July
• RBS’s H1 results will be out on Thursday 30th
• Lloyds Banking Group’s H1 is set for Friday 31st July

Barclays Q2 operating profit is expected to rise 10% to £658m, lifting H1 EBIT to £2.6bn.

Adjusted pre-tax profit is not expected to be as robust in Q2 as it was in the quarter before though.

It rose 9% to £1.85bn whilst a somewhat lighter £1.29bn is expected for Q2.

The latter will be 22% lower than the same quarter a year before, partly due to the slimmed down scope of what BARC now calls its ‘core’ ops versus its non-core, especially after parts of its investment bank were moved over to the ‘non-core’ side.

An expected annual dividend of 8p leaves scope for Barclays to increase the pay-out in Q2, given that the first quarter’s was flat at 1p/share.

Apart from earnings, there’s been some attention on Barclays’ management after its CEO, Antony Jenkins, was unexpectedly dismissed earlier this month.

Further clarification of the recruitment process for his successor, and how long it will take, from interim executive chairman John McFarlane, would play well with investors.

There has been some unease over the consolidation of control in the latter, voiced by a few large institutional investors, judging by media comments.

At Lloyds, there will be a greater focus on revenues: net of expenses, these are forecast to slip 4% to £4.52bn in Q2, making £9.1bn for H1.

The first-quarter’s 21% rise in underlying profit to £2.17bn is not expected to be repeated in Q2.

The market sees underlying earnings of £1.69bn in Q2, 16% lower year-on-year.

The market hopes that Lloyds at least manages to avoid springing one of its seemingly interminable negative surprises, though additional provisions to cover future damages for past bad behaviour are difficult to rule out.

The dividend front may provide better news. But even here, LBG has some catching up to do to reach forecast yields of 4.7% for next year, at the announced rate of less than a penny a year.

RBS may update the market on moves for its planned re-privatisation, whilst it reports earnings that are forecast to stabilise in terms of net interest income at £2.8bn for Q2, virtually the same as the Q1.

RBS may have more to lose than its other UK peers should it disappoint on the timeline for dividends (RBS is not likely to begin pay-outs this year) and on its net result.

RBS’s net income for the quarter needs to be no lower than the £1.1bn the City forecasts.

Shell-BG tie-up may eclipse oil sector results

Royal Dutch Shell’s on-going takeover of gas giant BG Group, may very well draw more attention than major oil company earnings next week.

• BP releases Q2 earnings on Tuesday 28^th July
• Royal Dutch Shell’s Q2 results will be out on Thursday 30^th
• BG Group’s Q2 results will be released on 31^st

Shell recently said it was expanding the synergies it expects from the takeover above the original target of about $1bn. Some elaboration and clarification can be expected with its earnings release.

As for Q2 earnings, it warned at the end of April that Q2 core profit would be damped by divestments, reduced refining and maintenance after reporting £4.2bn in Q1.

BP may give more detail on its recent final settlement of damages for the Gulf of Mexico oil spill.

Core underlying profit was $2.6bn in Q1 and in Q2 is expected to be half the amount BP reported a year ago—leaving about £1.68bn.