The week ahead: Lloyds Bank, HSBC, Barratt Developments
It's bank reporting season and four of the five big names step up this week. Also watch for results from other blue chips including Centrica and Glencore.
Monday 19 February
Gleeson (M J), Petra Diamonds, Mccoll's Retail, Reckitt Benckiser, Spectris, Fidessa
Tuesday 20 February
HSBC (HSBA) kicks off the banking sector results season Tuesday with chief executive Stuart Gulliver's delivering his last set of results.
Watch for fourth quarter underlying pre-tax profit of $3.63 billion, says Deutsche Bank analyst David Lock, down from $5.44 billion the previous quarter. That's because of a drop in revenue at the Global Banking and Markets division and higher costs, including a $1 billion bank levy, and higher impairments.
Income seekers will be especially interested in progress at the World's Local Bank, and Deutsche pencils in a flat dividend of 51 US cents for the full-year 2017.
"HSBC is trading at 14.4x 2018 [earnings per share], 1.5x [tangible net asset value] for a [return on tangible equity] of 10.5%, which screens relatively expensive vs European banks, though cheaper than Hang Seng and Bank of East Asia (c.17x)," writes Lock.
He keeps his 'hold' rating on the shares, believing there's upside risk from among other things higher US rates, an improvement in the emerging markets outlook and lower-than-expected loan losses.
Tristel, Springfield Properties, Green Reit, BHP Billiton, Dunelm, Synectics, Novolipetsk Steel, UBM, Lighthouse Group, InterContinental Hotels Group, HSBC
Plaza Centers, JP Morgan Income & Capital Investment Trust
Wednesday 21 February
Don't expect any surprises in Lloyds Banking Group's (LLOY) annual results, published midweek, says UBS.
Instead, it sees the dividend declaration and strategy presentation as key to the performance of the share on the day and beyond. The broker wants to see underlying pre-tax profit of £1.91 billion and an ordinary dividend of 2p, with an extra 1.2p a share most likely by way of share buybacks. Look for a common equity tier 1 (CET1) ratio of 13.7%.
"On our estimates – which are little changed ahead of results – we see LBG trading at 8.7x 2018 EPS and with a dividend yield of 7-9% over 2018-2021," writes UBS. "Though the debate with investors around the 'right' free-cashflow yield for a low growth bank continues to rage, we see LBG's capital generation as undervalued and retain our 'buy' rating despite the regrettable uncertainty around its near term payout potential.
"Our [sum-of-the-parts]-derived target price is rolled to 2019e but with our target price remaining 85p. Combined with strong dividend yield we see total return over 20% and retain LBG as one of our top picks in Europe."
Housebuilders are stuck in a rough patch, so investors will be keeping a close eye on half-year results from Barratt Developments (BDEV) Wednesday.
Traders have locked in fat profits made since the post-EU referendum rally and, with no extension to 'Help to Buy', rising costs and a wave of substantial share sales by directors, the sector is currently out of favour.
But Peel Hunt analyst Clyde Lewis sees few surprises in these numbers given we had a pretty thorough update last month. Key here will be margin performance, expected to come in a little lower than a year ago. There is also upside risk to predictions of flat full-year margin, thinks Lewis.
Also watch for any update on current trading. Rivals hint at a slightly slower level of activity than a year ago.
"We remain relaxed about the market outlook for UK housing as long as unemployment levels and GDP don't weaken sharply," writes Lewis.
Currently, Barratt trades on a price/net asset value of 1.46x for calendar year 2018, below the sector average of 1.7. It also offers an above-average dividend yield of 8.2% versus an average of 6.4%. Says Lewis:
"While we see more upside in some of the smaller housebuilders, Barratt looks the best value of the big three housebuilders currently. Good news on margins could be a possible catalyst."
Hotel Chocolat, Barratt Developments, Capital & Counties Properties, Glencore, Lloyds Banking Group, Unite Group, FirstGroup
Target Healthcare Reit, Titon Holdings, Bankers' Investment Trust, Schroder European Real Estate Investment Trust, Gooch & Housego, City of London Investment Group
Thursday 22 February
Wilmington Group, Safestore, Hays, Go-Ahead, Vitec Group, Serco, TBC Bank Group, Moneysupermarket.com, BAE Systems, Intu Properties, Barclays, British American Tobacco, Centrica, Kaz Minerals, Playtech, Anglo American, Morgan Sindall, Macfarlane, Rathbone Brothers, Hansard Global
Zytronic, APC Technology Group
Friday 23 February
International Consolidated Airlines, Pearson, Rightmove, Royal Bank of Scotland, Standard Life Aberdeen, William Hill
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation, and is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. 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.