With earnings season in full swing on both sides of the Atlantic, we prepare for the results from the engine room of the UK economy. The Banking Sector is not just one of the most popular on the London Stock Exchange, but is also a key barometer for the UK economy, impacting both markets and consumers. Ignore them at your peril.
The four largest UK financial institutions – Barclays, Lloyds, HSBC and the Royal Bank of Scotland – all report second quarter figures over the next two weeks. These FTSE 100 giants can have a profound impact on the index and consumer sentiment as a whole. Will they be able to lift the UK’s blue-chip index to fresh record highs?
From a round-up of key ongoing and upcoming economic and political events, to a reminder of how markets reacted to Q1 figures, this report covers everything you need to know about UK banks, and much more besides.
European central banks flock to hawkishness
Taking over the mantle as the biggest driver of markets over the past few weeks has been central banks, both in North America and Europe. While the US Federal Reserve has been gradually raising interest rates from a record low, the Bank of England (BoE) and European Central Bank (ECB) have been stuck behind the curve. Until now. Recently, policymakers from both institutions have turned more hawkish, implying interest rates could be raised soon, positively impact banks’ earnings by increasing net interest margins and thus profits. Recent weak data, however, has raised concerns. Will Europe disavow data to join the US in tightening policy this year?
UK and EU get down to business
While Central Banks have claimed back the headlines over the past three months, another even more important event for UK banks has begun. Brexit negotiations between the UK and the EU have started in Brussels, with both sides looking for concession from the other. The focus for the UK’s banks will be access to both the single market and customs market after Brexit is completed in 2019. Already, some institutions have announced intentions to move staff to the continent to avoid losing EU access, but as talks progress, will all banks be forced to resettle some employees?
Trump to take on tax?
Another quarter, another legislative disappointment for Donald Trump. The President has been forced to accept that the Republican healthcare bill is doomed after months of wrangling, which could see a multitude of potential of outcomes. It could see the administration move focus to ‘market-friendly’ policies such as vast tax reform and financial sector deregulation before the Summer recess. However, it could see the President intensify his efforts to remove Obamacare, a cornerstone of his campaign policies. Will the members of his inner circle focus on keeping the Republican repeal bill from dying or will they instead breathe new life into the ‘Trump trade’?
For the all-important Q2 reporting dates for the four major UK banks, a recap of how they performed on the back of their Q1 results in February and a summary of US peers’ Q2 performances so far, take a look over the page