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The week ahead: Could Lloyds Banking spring a surprise?
By Interactive Investor | Fri, 17th February 2017 - 17:06
Monday 20 February
Sareum Holdings, Gemfields, Vedanta Resources, Hammerson, BGEO Group
Tuesday 21 February
Analyst David Lock looks for underlying pre-tax profit of $3.7 billion for the three months, although he admits "FX movements in the quarter could mean a messy set of numbers".
And FX moves, including a 5% surge in the dollar during the quarter, are likely to have tipped tangible net asset value (TNAV) lower. Underlying costs are put at $8.4 billion for the three months, a touch ahead of consensus, although it is management's cost outlook that will be crucial here.
"CFO Iain Mackay said that despite the progress made on costs, HSBC still faced "significant inflationary pressures"," says Lock. "The original plan had expected costs to peak in late 2016 or early 2017 – management now expect it not to peak for another 6-9 months after that."
For the 12 months, Lock is after EPS of 63.6 US cents and dividend of 51 cents.
Image Scan Holdings, Vernalis, Galliford Try, BHP Billiton, Green Reit, InterContinental Hotels, Anglo American, HSBC, Lighthouse Group, John Wood Group
Wednesday 22 February
Lloyds Banking (LLOY) shares are loitering near post EU referendum highs, but the lender still manages to divide opinion in the City. We've just interviewed Laura Foll at Henderson who worries about shrinking share of the mortgage market and "muted" dividend growth.
On the other hand, there are brokers like Barclays who still rate Lloyds shares as 'overweight' with 75p price target.
"The shares are attractively valued at 9.2 times 2017e underlying earnings and 1.2 times 2017e tangible book value," its analysts say. "Consensus momentum has been positive since expectations bottomed out in October 2016 and this should continue with further upgrades from net interest margin and provisions."
It thinks market expectations for declining profits are too pessimistic. Instead, Barclays is confident earnings can be maintained at around 2016 levels both this year and next, then grow in 2019. For 2017, the broker is 5% ahead of consensus forecasts.
However, "provisions and dividends could surprise positively," it writes.
As a guide, Barclays looks for fourth-quarter net interest income of £2.88 billion, £267 million of impairments, and underlying pre-tax profit of £1.68 billion. For the full-year, it wants a £7.75 billion profit, giving underlying earnings per share of 7.3p.
Now that Lloyds is buying MBNA's £7 billion UK credit card book, Barclays eyes a 1.7p per share quarterly ordinary dividend to be supplemented with a 0.3p special payout. That takes the full-year dividend to 2.9p. Barclays believes it will hit 3.6p in 2017.
Hays, Barratt Developments, Indivior, Serco, Unite Group, UBM, Petrofac, Lloyds Banking Group, Capital & Counties Properties
Thursday 23 February
Wilmington Group, Monitise, RSA Insurance, RELX, Rathbone Brothers, Centrica, Rentokil Initial, National Express, Barclays, Greencoat UK Wind, British American Tobacco, BAE Systems, Playtech, Glencore, Mondi, Kaz Minerals, Intu Properties, Howden Joinery, Morgan Advanced Materials, Macfarlane
Friday 24 February
TBC Bank Group, William Hill, Industrial Multi Property Trust, Jupiter Fund Management, Standard Chartered, Kennedy Wilson Europe Real Estate, IMI, Pearson, Royal Bank of Scotland, Coats Group, Rightmove, Standard Life
This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.