Barclays set for profit jump as it kicks off bank reporting season

Barclays is first among the banks to present its annual results next week, as lenders hope to firmly put PPI behind them.

Analysts expect profit before tax to reach £6.048 billion at Barclays in the 2019 financial year when it reports on Thursday, up from £5.7 billion a year before, according to consensus figures compiled by the bank. These figures do not include litigation and conduct items.

A day later new Royal Bank of Scotland boss Alison Rose will hope to deliver the £3.765 billion operating profit in the 2019 financial year that analysts are forecasting, according to a company-provided consensus. It will be an increase from £3.359 billion the year earlier.

The deadline for claiming money back for mis-sold PPI (payment protection insurance) passed in August, making this the last PPI-influenced set of annual results.

Investors will be keeping an eye on the results season to see what direction Britain’s biggest lenders are travelling in, analysts say.

“Back in late October, the third quarter reporting season for the banks was largely forgettable, whereas these upcoming results will both summarise the direction of travel over the past year and, equally importantly, give some guidance on current and future prospects,” said Richard Hunter, the head of markets at interactive investor.

Banks were given what could prove to be a temporary stay of execution last month when the Bank of England’s Monetary Policy Committee decided not to slash interest rates, as many had expected them to.

Things may change when the rates come up for review next time “depending on how trade negotiations progress with Europe and indeed how the UK economy reacts in the meantime”, Mr Hunter said.

Analysts will also keep an eye on indications that the market is picking up after December’s election, and more clarity on Brexit.

Investors certainly reacted with confidence after the election, sending Barclays’s shares up by 12% in the two sessions after the vote. RBS saw a similar spike, as did Lloyds and HSBC, though all have given back some gains since.

Barclays is certainly less busy than it was when presenting its results for 2018 a year ago.

At the time activist investor Edward Bramson was trying to muscle onto the bank’s board, while former boss John Varley and three other ex-Barclays staff were on trial in a £322 million case brought by the Serious Fraud Office. Varley was later acquitted of the charges, while his co-defendants are set for a retrial.

It all combined to make Barclays the most written-about business of 2019 in the UK press, according to Briefcase.news, a business news service.

At RBS, Ms Rose took over from Ross McEwan late last year, years after the New Zealander was appointed to help the struggling bank reposition after the financial crash.

The bank swung into a loss in the third quarter of the year, after revealing a £900 million hit from the PPI scandal over the period.

One eye will be on how the bank’s largest shareholder, the UK Government, might react to the results.

“There have already been rumours the Chancellor, Sajid Javid, might look at selling the Government’s remaining 62% in RBS at a fairly early opportunity, but that will depend to some extent on the bank’s performance,” said analysts at the Share Centre.