It’s the most wonderful time of the year. That’s right, major UK banks are back to report quarterly results next week and here’s the full lay-down. And before you focus on just the usual quartet of Barlcays, Lloyds, RBS and HSBC, don’t forget to pay close attention to their smaller, pluckier competitors, including Standard Chartered, Metro Bank and CYBG.

Investors love the Big Four major UK banks, and rightfully so. They are all household names, they dominate the UK retail banking market and they have the financial heft and reach to compete on the international arena.

Last time the Awesome Foursome reported, we’ve seen some very diverging results. Lloyds and RBS were the big winners the previous quarter, with both their Q2 profits beating market estimates, Lloyds’ PPI claim numbers beating expectations and RBS reinstating its dividend for the first time since the 2008 crisis. The market rewarded them handsomely, with RBS shares jumping as high as +3.9% on 3 Aug, while Lloyds traded in as high as +2.5%.

Barclays disappointed long-term investors, with shares jumping +3% at the open, but then sliding through the session to as low as -3.4%. For bullish traders who hold shares over the long-term, that was obviously a disappointing share price move.

But when trading short-term, intra-day, a 12.3p/6.4% daily range that Barclays saw on 2 Aug is nothing to sneeze at. If you watch the markets with an eagle’s eye, it doesn’t matter which way the shares move, as long as you are ready to capture the move. Read the broker previews beforehand, buy or sell shares a day before results are announced, benefit from the initial move, then react accordingly depending on where the shares move intra-day.

And if you are not fixated on just on the big banks, the likes of Standard Chartered (reporting H1 results on 31 Oct) could offer similar big moves. Standard Chartered traded in a 31.4p/4.5% daily range when it reported half-year results in late July and a 31.2p/4.1% range in May when it reported first-quarter revenue.

Will we see similar big moves from the banks when they start reporting next week? Most analysts are closely watching banks’ Net Interest Margins (NIMs) for the key measure of their profitability. NIMs represent a difference between the interest that banks charge their customers and the interest they pay out on deposits. And with both the Bank of England and the Fed recently raising key interest rates, the likes of Barclays and RBS could benefit.

That said, the competition for deposits in the UK’s banking sector means that cash savings rates are going up (potentially eating into NIMs). Next week we’ll see which bank was able to better manage that relationship to capture most value from rising interest rates.

One hint for UK Banks’ results could be found in this week’s performance of their US counterparts. All major US banks reported increased Q3 net income (Bank of America +32% YoY, Goldman Sachs +19%, J.P. Morgan +24), but the divisional revenues diverged. Goldman and Morgan Stanley were the big winners on Investment Banking (+10% YoY and +14%, respectively), while J.P. Morgan excelled at Equity Trading. (Source: FT)

If investment banking deal-flow is where the value lies for big banks, could Barclays’ shares benefit in major way this quarter, given its strong investment banking division and exposure to the US market? In fact, many analysts share the same outlook, with brokerage Berenberg saying (1 Oct) that Barclays has the “strongest non-US investment bank franchise” in the profitable US IB market.

This has been a tough year for major UK banks, with all of them except Barclays currently trading at 2018 lows (Barclays itself has managed to bounce 2.33% from 2018 lows). Has the first Bank of England interest rate hike provided enough impetus for the banks to return to strong performance? Watch this space next week.

Or better yet, let’s watch it together. One way you can keep track of all the latest news on big UK banks is by signing up to our free research trial. Do you have an opinion on UK banks? Get in touch with me and we can discuss your trading options, so you can benefit from the big market moves next week.

Mark Crouch, Traders, 19 October 2018