Banks, BP and Greggs among key updates in coming week, Bank of England and non-farms draw macro focu


The coming week will see more results from blue-chip banks in the form of HSBC (LSE:HSBA) and Standard Chartered, meanwhile, oilers will once again be in focus as BP delivers figures.

Other notable names in the diary will be bakery chain Greggs, insurer Legal & General, engine maker Rolls Royce, housebuilder Taylor Wimpey (LSE:TW.) and exchange operator LSE Group.

Meanwhile, the macro calendar is likely to be dominated by the latest decision on interest rates from the Bank of England as well as US non-farm payrolls at the end of the week.

Big bank reports wrap up with HSBC and StanChart

Banking results season in the UK wraps up with updates from the two big banks least focused on the UK: HSBC Holdings PLC and Standard Chartered PLC (LSE:STAN).

HSBC issues half-year results that will allow analysts to measure progress towards the broking community consensus forecast for full-year pre-tax profits of US$14.9bn.

UBS is predicting second-quarter profit before tax of US$4.6bn and a CET1 ratio – a measure of balance sheet strength – of 16.2%,

“Our interpretation of conference call guidance was that 2Q net interest income would likely be largely stable QoQ [quarter-on-quarter] as margin pressure lessens,” UBS said.

Net interest income is tipped to US$6.52bn and non-interest income US$6.13bn.

As with Standard Chartered, HSBC’s focus on Asia means that political considerations always lurk in the background.

“In many ways, HSBC remains the meat in the sandwich between China and Western politicians and regulators, who are taking a colder, harder line on Beijing’s policies, something which could yet make life hard for chairman Mark Tucker, CEO Noel Quinn and their team, as they cannot really afford to annoy the authorities in their most profitable Asian markets,” observed Russ Mould, the investment director at AJ Bell.

There is likely to be considerable interest in the dividend level as the bank is now free of the Bank of England looking over its shoulder and tutting at overly generous dividends.

The bank did not announce a quarterly dividend with its first-quarter results so it has a bit of catching up to do. For the full year, analysts are expecting a divi of 23 cents, up from 15 cents the year before.

Standard Chartered weighs in with second-quarter results on Tuesday, with the market expecting adjusted profit before tax of US$999mln.

Provisions for bad loans are expected to be around US$197mln, which represents a big improvement on US$611mln in the same quarter of last year.

BP likely to talk up renewables, whilst oil profits rise

Renewables will be on the agenda for BP PLC (LSE:BP.) as it releases its trading update on Tuesday, though the financials continue to be driven by the strong oil price.

July has already seen BP pledge up to GBP10bn of new investment in offshore wind in the UK North Sea as its bid for acreage in a government leasing round, along with plans to build interests in electric vehicle charging networks, green hydrogen, and shipbuilding.

The oil giant promised to make Scotland BP’s ‘global centre of excellence for offshore wind’, and, according to BP executive vice president Dev Sanyal, BP sees a resilient clean energy future for the country.

It’s the latest environmental flex from BP as it seeks to evolve and reduce at least the proportion of hydrocarbons in its business.

Right now, the focus operationally remains oil centric and current crude prices are boosting cash flows.

Second-quarter net income should come in at almost US$2bn, forecast UBS, down 24% on the preceding quarter but up from a loss of US$6.68bn a year ago when results contained a write-off of much of BP’s intangible exploration costs.

“It needs to be borne in mind that the reason for the sequential decline is that BP booked a significant but not precisely disclosed gas and power trading profit associated with Storm Uri,” analysts said.

Greggs serves up fresh results

With city centres opening back up after lockdown, half-year results from bakery chain Greggs PLC (LSE:GRG) on Tuesday will be eyed closely to ensure the chain is still on a roll and bringing home the bacon.

The firm’s most recent trading update in June showed that demand for sausage rolls, pasties and other pastries rebounded strongly as lockdown measures were eased, with sales at its stores 3% above 2019 levels.

With Greggs having said it expects sales to be back at pre-pandemic levels this year, the outlook will be eyed for any more details on forecasts, as well as any new features the company is planning to roll out to reach more customers following the success of its vegan products and delivery options.

L&G should be more optimistic

Half-year results from Legal & General Group PLC (LSE:LGEN) on Wednesday should be supported by macroeconomic advances in recent months.

We last heard from the life insurer back in March when it said it had set aside another GBP110mln for possible early deaths due to the new strains of COVID-19, expecting pandemic-related claims to rise in 2021.

In 2020 operating profits were reduced by GBP228mln due to the pandemic, including GBP76mln for COVID-19- related claims.

While excess deaths are moderating, investors should not expect this to be a focal point at the half-year results, analysts at Barclays said, as mortality and longevity assumption changes are typically made at year-end.

Retail sales volumes in the life insurance market should show a “modest but continued recovery”, the analysts added, while bulk annuities “had a pedestrian start to the year, but those are typically skewed towards the second half”.

Investment margins for the LGIM arm, which in the last year or so seems to have become one of the most powerful industry voices on ESG matters, should be supported by “favourable market trends”, while solvency ratios should be supported by higher rates and stronger equity markets.

Taylor Wimpey on solid foundations

Housebuilder Taylor Wimpey’s half-year results on Wednesday could be facing some nice comparatives given house purchases ground to a halt last year during the first set of UK lockdowns.

With this in mind, investors are likely going to look to 2019 for a more accurate comparison of how the business is doing, although given the firm has continued to maintain its full-year guidance few surprises will be expected.

As a result, comments on demand levels are likely to be a key focus as well as the order book when read against the current state of UK house prices.

Results from Rolls

Half-year results from Rolls-Royce Holdings PLC (LSE:RR.) should see the propulsion systems maker benefit from a slight recovery in engine flying hours; the group expects these to recover in 2021 to around 55% of (pre-pandemic) 2019 levels.

Nevertheless, it will “likely be another difficult set of results with limited improvement in the flying hours of the fleet beyond cargo engines (757/767/ some A330s) and the A350,” according to UBS.

“Investors are wondering about the A330 return into flight in Asia and China as the parked remains high at 21.7% of the fleet, and airlines request for payment deferrals. PS recovery seems to lag other Industrial peers which all seem to report a strong 1H, so more colour on orders, risk to supply chain and inflationary pressure would be welcome,” the Swiss bank added.

The market is expecting half-year revenue to dip to US$5.50bn from US$5.56bn in the first half of last year.

Earnings before interest and tax (EBIT) are expected to show a massive improvement from last year’s GBP1.67bn loss but should still be negative; the consensus forecast is for a loss of GBP129mln.

Finals from Frasers

Mike Ashley’s Frasers Group PLC (LSE:FRAS) will deliver final results on Thursday, although attention is likely to be on any updates to the firm’s cautious outlook as it continues to fret about the potential impact of the latest wave of COVID-19 infections on consumer confidence.

However, the strong spending data following the end of most lockdown restrictions may have alleviated some of the previous anxiety around sales, however, the firm’s large store estate could present another point of concern given the pressure on bricks and mortar stores amid the ongoing surge in online shopping.

ONS figures showing a fall in clothing sales in May and June may jangle some nerves also, particularly for the firm’s House of Fraser and Flannels businesses, with investors likely to hope a boom in football apparel sales from Sports Direct during the Euros has offset any weakness.

LSE costs and IPOs in focus

The market is likely to focus on London Stock Exchange Group PLC (LSE:LSEG)’s costs and revenue growth in the second quarter when it reports half-year results on Friday.

This will mark the first update since LSEG guided to higher-than-expected 2021 costs of integrating new acquisition Refintiv in March.

But the LSE also said the past year saw London-listed firms raise the most money in more than a decade, though share trading in Amsterdam outstripped the UK for the first time earlier this year.

However, after a strong time for new listings in the past year, the IPO pipeline is continuing to channel new companies onto the market in 2021, while the Refintiv addition has strengthened the group’s revenue streams into data, trading tools, analytics and risk management across financial markets.

“The shares remain a show-me story as we think it will take some time for the market to give the company credit for the acquisition-related earnings growth and cash flow generation in the coming three-five years,” said UBS.

Macro matters

In the world of macro data, the US non-farm payroll (NFP) report is pretty much always big news – that comes on Friday.

Before then we have some important ‘flash’ PMI surveys on both sides of the Atlantic on Wednesday, and a Bank of England monetary policy meeting that comes after two members of the rate-setting committee broke ranks to question the merits of current policy and suggesting that the asset purchase program might need to be reined in.

Deputy Governor Dave Ramsden said the case for considering the paring back of some stimulus measures was rising, acknowledging that the vaccine program has potentially changed the game when it comes to dealing with the virus.

It was notable that he was joined in this view by external MPC member Michael Saunders, with both expressing rising concern at how transitory or otherwise inflation levels were likely to be, said market analyst Michael Hewson at CMC Markets, pointing out that this came after recent unemployment numbers showed there appears to be up to 1mln vacancies that UK businesses are struggling to fill.

“The Bank of England is not likely to make any policy changes,” said Marshall Gittler at BDSwiss. “The focus then will be on any changes in forecasts in the August Monetary Policy Report and how many people (if any) vote to change the quantitative easing program. The Bank could announce the results of a study into how it would go about unwinding its asset purchase program when the time comes.”

Friday’s NFP report – a key reading of the US economy for the Federal Reserve policymakers – is forecast to show 925k jobs were added to the economy in the past month, up from 850k in June and May’s 583k.

Last month’s number “didn’t tell us too much about the overall state of the US labour market in terms of how quickly those US workers who have dropped out of the workforce since February last year are likely to come back”, said Hewson, and also brought a surprise increase in the unemployment rate to 5.9% and an unchanged participation rate of 61.6%.

This latter number appears to be more of a concern for some on the Fed committee – as it wants a “broad and inclusive” recovery in the labour market – than the spike in inflation currently being seen.

Significant announcements expected for week ending 6 August:

Monday August 2:

Interims: HSBC Holdings PLC, Senior PLC (LSE:SNR), XP Power Ltd

Economic data: UK manufacturing PMI, US manufacturing PMI

Tuesday August 3:

Trading announcements: BP PLC, AG Barr (LSE:BAG) PLC, Lamprell PLC (LSE:LAM, OTC:LMPRF)

Finals: Filtronic PLC (LSE:FTC), Joules Group PLC (AIM:JOUL), NWF Group PLC (AIM:NWF)

Interims: Standard Chartered PLC, Greggs PLC, Direct Line Insurance (LSE:DLG) Group PLC, Travis Perkins (LSE:TPK) PLC, Ultra Electronics (LSE:ULE) PLC, Aferian PLC, Coats Group PLC (LSE:COA), Keller Group (LSE:KLR) PLC, Rotork (LSE:ROR) PLC, Fresnillo PLC (LSE:FRES), Domino’s Pizza Group PLC, Weir Group (LSE:WEIR) PLC, TP ICAP (LSE:TCAP) PLC

Economic data:

Wednesday August 4:

Trading announcements: UDG Healthcare (LSE:UDG) PLC

Interims: Legal & General Group PLC, Taylor Wimpey PLC, Ibstock PLC (LSE:IBST), Morgan Sindall Group PLC (LSE:MGNS), Hiscox Ltd, Ferrexpo PLC (LSE:FXPO)

Economic data: UK services PMI, US ADP jobs, US services PMI

Thursday August 5:

Finals: Frasers Group PLC, NCC Group PLC (LSE:NCC)

Interims: Rolls-Royce Holdings PLC, Serco Group (LSE:SRP) PLC, WPP PLC (LSE:WPP), Centamin PLC (LSE:CEY), Glencore PLC (LSE:GLEN), Meggitt PLC (LSE:MGGT), Evraz PLC (LSE:EVR), Hammerson (LSE:HMSO) PLC, IP Group PLC (LSE:IPO), Mondi PLC (LSE:MNDI), Secure Trust Bank PLC (LSE:STB), Spirent Communications (LSE:SPT) PLC, Synthomer (LSE:SYNT) PLC, Tritax Big Box REIT PLC (LSE:BBOX), TT Electronics PLC (LSE:TTG), ConvaTec Group PLC (LSE:CTEC)

FTSE 100 ex-dividends to knock 5.15 points off the index: Unilever PLC (LSE:ULVR), Reckitt Benckiser Group PLC (LSE:RKT, FRA:3RB, ETR:3RB)

Economic data: BoE rates decision, UK construction PMI, US trade balance, US jobless claims

Friday August 6:

Interims: London Stock Exchange Group PLC, Hikma Pharmaceuticals PLC (AIM:HIK, OTC:HKMPF), ContourGlobal PLC (LSE:GLO), The Renewables Infrastructure Group

Economic data: US non-farm payrolls, US earnings


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