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Fundamental outlook
UK banks make up almost 7% of the FTSE 100’s market capitalisation, so the figures are always closely watched. Lloyds is likely to see the end of the government’s stake very soon, which will mark the end of an era. The bank may also look to unveil another special dividend, following on from the past two years, helping to confirm its status as one of the key income stocks for UK investors.
Meanwhile, Barclays will be aiming to confirm its status as one of the banks with global ambitions, although inevitably its CEO’s recent indiscretions over whistleblowing will come up once again. Nonetheless, if its trading arm can put in a good showing then that will help boost the performance of the group as a whole. And then there is RBS – the government is looking to get out of here as well, only this time at a substantial loss. Underlying profits are expected to improve from last year’s unimpressive £440 million, with the private banking arm having done well.
UK banks face a tricky environment over the next few years, thanks to Brexit, although they have relatively little to fear from the general election, given that the Conservatives remain the firm favourites. The City will find itself under pressure from the EU determined to take away business from the UK, with some operations inevitably being relocated to the continent.
HSBC and Standard Chartered offer a chance for investors to look outside the Brexit narrative, and look towards emerging markets. The former has been given a boost with its appointment as an adviser for the Aramco IPO, while the latter retains its attractions as a play on Asian growth, especially now after it has worked through the majority of its regulatory issues.
Technical outlook
RBS
RBS shares hit a peak of 260p in late February, and then drifted below the 50-day simple moving average (SMA) for the first time since November.
A recent bounce following the general election has taken them back above this important marker, leaving them clear to test the key 260p level once again. The shares have been steadily rising since their nadir in July, so any further dips should be taken as buying opportunities.
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