Mindful Money’s weekly shares watch: Man Group, Royal Bank of Scotland & Lloyds

23rd February 2015


Despite a number of market updates set to arrive this week, UK banks are set to take centre stage.

Monday saw HSBC report a steep 17% fall in profits and Lloyds and Royal Bank of Scotland are set to follow with their own reports later in the week.

But first Wednesday sees alternative investment management business Man Group unveil its own set of fourth quarter results. With its stock having rebounded by a massive 122% over the past year, shareholders will be eager to find out how much further they can potentially go. Sentiment appears bullish with the broker consensus currently calling the shares a ‘buy’.

Sheridan Admans, investment research manager at The Share Centre, concurs with the wider market view. He says: “The shares have recovered very well over the last six months but there is still a long way to go before they reach the highs just before the financial crisis. Some of the key funds have begun to perform better and therefore have seen fund inflows rather than outflows.

“As a result of this, and an improving stock market, investors should expect the funds under management to improve. Investors will also want commentary on how the various acquired businesses are performing.”

On Thursday Royal Bank of Scotland delivers its own full-year results and Brewin Dolphin equity analyst James Box says the market will be expecting continued capital build and hoping for further loan loss provision write-backs driven by the improving Irish real estate market.

He says: “We would also be seeking a bit more clarity around how RBS plans to generate an adequate return on a capital on its Corporate and Institutional Banking business.”

The bank’s shares have moved up 10% in the past year but ahead of the release, with the UK government’s majority shareholding still overhanging, analyst consensus opinion signifies a ‘sell’.

Hargreaves Lansdown equity analyst Keith Bowman highlights that the pending general election and increased uncertainty sets the backdrop and “additional bank levy taxes or a possible vote on leaving the European Union could result”.

He adds: “Further charges in relation to alleged foreign exchange manipulation and Payment Protection Insurance (PPI) may be taken. On the upside, a reiteration of the group’s passing of Bank of England stress tests back in late 2014 might be seen, whilst management’s focus on cost cutting is likely to be further underlined.”

Lloyds Banking Group, down 5% over 12 months reports its full year results on Friday.

Brewin Dolphin’s Box highlights that shareholders will be hoping that it announces a maiden dividend, “albeit a token one”, or at least provides some indication as to when capital returns will be forthcoming. “The market will also be focused on PPI claims as well as Lloyd’s ability to withstand pressure on net interest margin and commission income,” he adds.

Bowman adds that some similar themes to RBS could be outlined, including management’s pursuit of lower costs and like Box, he is hoping for some positive dividend news.

He says: “With the current government keen to sell its remaining share stake in order to bolster the national finances, any news of the group’s talks with the Prudential Regulatory Authority regarding a resumption of the dividend payment heads the agenda. A payment in the region of one penny per share is currently forecast.”

Ahead of the announcement, and with the bank seen as a beneficiary of further UK economic recovery, analyst consensus opinion highlights a ‘buy’.

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