Barclays kicks off bank results on Wednesday with Fed dominating macro diary


The mid-point of the week will see the start of the blue-chip banks reporting results with Barclays set to deliver its interims. Other major firms in focus will be pharma giant GlaxoSmithKline, British American Tobacco and budget airline Wizz Air.

Meanwhile, there will also be action across the Atlantic as the Federal Reserve makes its latest decision on interest rates, while the US earnings diary is due to see figures from vaccine-boosted Pfizer (NYSE:PFE), Facebook Inc (NASDAQ:FB), Visa (NYSE:V), Qualcomm, Boeing, AMD and Ford Motor Co.

Barclays first up among the banks

Barclays is first up on the list of FTSE 100 banks scheduled to report this week.

UBS is forecasting a second-quarter adjusted profit before tax for the bank of GBP1.8bn “in a result in which capital market revenues, loan loss overlay write-backs and restructuring charges will likely distort headline numbers”.

UBS is also predicting the CET1 ratio – a measure of balance sheet strength – will be 14.4%, including the exclusion of capitalised software intangibles.

BAT hopes to spark interest with results

Lucky Strike and Pall Mall owner British American Tobacco PLC (LSE:BATS) reports its half-year results on Wednesday, with the number likely to be highly anticipated by investors after the firm’s better than expected trading update in June.

Despite the increasing pressure on the tobacco industry from regulators and a somewhat lukewarm take-up of next-generation products (NGPs), BAT has managed to keep growing its dividend and pay down its debts. It has also seen sales accelerate of its own NGPs, namely its Vuse, Vype and glo brands.

The firm’s CEO Jack Bowles has also flagged up improving cigarette volumes in emerging markets and better market share in developed jurisdictions, so shareholders will be hoping these trends continue into the rest of the year and beyond.

In the numbers themselves, consensus is expecting first-half sales of GBP12bn, down from GBP12.2bn a year ago, and an adjusted operating profit of GBP5.2bn compared to GBP5.4bn last year.

A dividend of 53.9p will also be expected, in keeping with the group’s strategy of paying 215.6p per share in dividends and distributing around two-thirds of its profits.

GSK eyed for clean bill of health

GSK’s numbers on Wednesday follow last month’s big strategy rejig, where under-pressure boss Emma Walmsley, as well as adding some details on the planned demerger next year of GSK Consumer Healthcare, unveiled new goals including lifting sales 5% a year on over the next decade, ramping up operating profit margins above 30% from the current mid-20s, and generating GBP10bn of cash generation over the next five years.

The dividend will be a “sacrificial victim”, in the words of financial analyst Danni Hewson at AJ Bell, as it is expected to drop to 80p a share in 2022 from the company in its current guise to 55p a share across ‘New’ GSK and ‘New’ Consumer Healthcare.

For the half-year, investors and analysts will be focusing on any changes to current guidance for an EPS decline of the current year of a “mid-to-high single-digit percentage”, plus developments in the key areas of vaccines (after missing out on the big Covid one) and speciality medicines, plus infectious diseases, HIV, oncology and immunology/respiratory, with a drug pipeline that currently contains 20 vaccines and 42 medicines.

Wizz Air comes in for landing

Following Ryanair on Monday, budget carrier Wizz Air is coming for landing with a trading update.

UBS is forecasting fiscal first-quarter revenues of around EUR225mln for the airline, up from EUR91mln a year earlier and well above the consensus forecast of EUR189mln.

The Swiss bank added that its forecast is based on the assumption that traffic levels will be at least more than 25% of pre-pandemic levels in the same quarter of 2019.

Fed in focus

The Federal Open Market Committee (FOMC), the rate-setting body of the US central bank, meets on Wednesday to make its latest decision on interest rates.

“The FOMC is bound to discuss the appropriate timing for tapering down their $120bn-a-month bond purchases, but they’re not likely to be in any rush to make a decision, IMHO,” says market analyst Marshall Gittler at BDSwiss.

At their last meeting on June 16, the Fed committee determined that reaching the standard of “substantial further progress” was still some way off, but that they expect progress to continue.

Since then, June jobs numbers were “good but not great”, but inflation is well over the 2% target, so Gittler wondered if the FOMC can still have confidence in their view that inflation is “transitory”.

While an optimistic outlook on the US economy can be expected, Gittler added.

“They are however likely to remain cautious because of the alarming spread of the delta variant of the virus. One hopes though that with most of the vulnerable over-60s cohort vaccinated, hospitalizations and deaths won’t rise at anything near the increase in new cases and the US can continue to open up. This is one of the main reasons why I think the ‘let’s wait’ crowd is likely to prevail.”

Significant announcements for Wednesday July 28:

Trading announcements: GlaxoSmithKline PLC (LSE:GSK), Wizz Air Holdings (AIM:WIZZ) PLC, Lancashire Holdings Ltd

Finals: Hargreaves Services Plc (AIM:HSP, OTC:HGRVF), Shearwater Group PLC (AIM:SWG)

Interims: Barclays PLC (LSE:BARC), British American Tobacco PLC, ITV PLC (LSE:ITV), Aston Martin Lagonda Global Holdings PLC (LSE:AML), Rio Tinto PLC (LSE:RIO), Smurfit Kappa Group plc (LSE:SKG), St James’s Place PLC, Aptitude Software Group PLC, Conduit Holdings Ltd (LSE:CRE), Hutchmed (China) Limited, MusicMagpie PLC, Primary Health Properties PLC (LSE:PHP, FRA:PP51), Quartix Technologies PLC, Rathbone Bros PLC, Foxtons (LSE:FOXT) Group PLC, Card Factory (LSE:CARD) PLC, Dignity (LSE:DTY) PLC

Economic data: Fed rates decision, US trade balance


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