UK banks set to report half-year results

Banks look set to dominate the British financial headlines next week when some of the UK’s best known high street names report half-year results.

HSBC sets the tone with its interim results tomorrow which will give its new chief executive Stephen Green an opportunity to stamp his authority on the group after taking up the reins at May’s annual meeting.

Headlines at the time were dominated by the issue of executive pay and comments on the current outlook gave little guidance on current trading leading stockbroker Gerrard to conclude revenue growth has been subdued.

But chairman John Bond did say that credit quality had shown “modest signs of deterioration” and analysts expect profits to come in at £3.2bn (€4.6bn) compared with £3.4bn (€4.9bn) a year ago.

Rival Royal Bank of Scotland takes centre stage on Tuesday. Its most recent trading statement, which came as it unveiled the acquisition of Churchill Insurance, was upbeat pointing to strong income growth.

The bank singled out its Direct Line insurance business as well as it Retail Direct personal finance operations, with growth in deposit and loan volumes and credit cards among the factors driving income growth.

With impressive organic growth on top of acquisitions and cost efficiency improving, analysts at Merrill Lynch are looking for pre-tax profits of £2.87bn (€4.1bn) compared to £2.32bn (€3.3bn) a year ago.

Investors will be looking for signs of recovery from the impact of SARS in the Far East on Standard Chartered which continues the banking theme with its first half results on Wednesday.

The bank has a strong presence across the region as well as increasing operations in emerging markets elsewhere in Asia and Africa, recently announcing plans to move into Afghanistan, and progress in new areas will be given careful attention.

Its wholesale banking operations have seen solid revenue growth as has consumer banking outside Hong Kong and analysts are expecting to see pre-tax profits edge upwards to $638m (€571m).

Away from banking, Wednesday also sees third quarter results from Galen Holdings, the drugs group which recently saw its shares surge from around 600p to 742.5p in a short-lived bout of takeover excitement before falling back to Earth as bid talks collapsed.

While investors will be keen to hear more from management on the episode, close attention will also be paid to the performance of newly acquired drug lines such as Sarafem, a treatment for pre-menstrual syndrome, as well as the progress launch of its Femring oestrogen product in the US.

While comparisons with last year are confusing because of the disposal of its pharmaceutical services business and currency factors, analysts are looking for pre-tax profits of around $26.6m (€24m).

High street banker Barclays, which reports first-half results on Thursday, said in a trading update in early June that it was keeping its focus after a “confident and disciplined” first quarter.

It said that higher business volumes had “more than offset” the impact of historically low interest rates in its core personal financial services arm which includes current accounts and loans.

While operating profits could well be down slightly on last year, pre-tax profits are expected to come in flat or just above the £1.75bn (€2.5bn) seen last time with analysts at Merrill Lynch looking for £1.78bn (€2.6bn).

Investors will be hoping for signs of solid progress when publishing and information group Reed Elsevier posts interim results on Thursday.

Analysts expect to see profits climb 6% to around £423m (€607m) with a good showing from its Science and Medical business as well as its legal publications operation but the results will be examined closely for evidence of improvements in the US schools market.

The company has also indicated the results will show the impact of adverse currency translations as well as a “modest decline” in revenues in its business division, reflecting global economic conditions, the drift in the advertising market and fewer non-annual exhibitions this year.