Earnings season could have merely delayed a rally in bank stocks
Two banks beat forecasts at the most recent round of earnings releases: Virgin Money and HSBC – which beat by a staggering 9.1% (see table below). What this says is that it is still possible for banks to outperform and is one very good reason why investors should keep an eye on the sector for its recovery potential. The UK 100 ’s banks have between 20% and 115% of potential upside ahead if they can turn things around and regain their 2015 high points.
It’s worth noting that shares in Royal Bank of Scotland are now nearly 2% higher than they were before a poor set of earnings on 5 August, which saw the company post a loss instead of the expected profit and the share price tank by 7%.
Barclay’s stock is now 10% higher than the close on 28 July, the day before its results missed forecasts by 34%.
shares in Lloyds Banking Group fell by 9.3% between 26 July and 5 August, and have since narrowed the loss to just 1.2% at time of writing.
Perhaps by the time you read this, the share prices of the UK’s blue chip banks will have broken out once more and gone higher still.
What the Brokers Think
Just two of the UK 100 banks have recommendation consensus below 3 but above 2, which implies neutral-to-bearish sentiment. Those above 3 indicate neutral-to-bullish sentiment with Barclays the current favourite with the analysts who follow the sector. Note also that in all cases the number of ‘Hold’ recommendations either equals or exceeds the number of ‘Sell’ recommendations. What’s more, all but two of the banks have more ‘Buys’ than ‘Sells.’
In the pages that follow we’ve made some important technical observations on Barclays, Lloyds Banking Group and Royal Bank of Scotland shares, to try to ascertain where they may be heading in the short to medium term. Simply read on…!
