UK banks’ results: Solid numbers priced in?

UK banks will report this coming week starting with HSBC on Tuesday 27th April, Lloyds 28th April, NatWest 29th April & Barclays 30th April. Results come after the world rallied across the primary three months of the year.
UK banks are set to report Q1 earning within the coming week. The results come after the world saw a stellar start to the year outperforming the broader market within the half-moon .

Part of the banks share price out-performance has been because the sector’s share price under performance last year. Banks are cyclical and their performance is closely tied to the performance of the broader economy.

What to watch:

Loan impairment charges

As the prospects for the united kingdom economy have improved so have those for the banks. Banks reported strong fourth quarter 2020 results. the bulk of banks beats on profits forecasts thanks principally to lower bad loan provisions.

Loan impairment charges this quarter are expected to stay low because of government support packages meaning fewer businesses are defaulting on borrowings. during a similar way that we’ve seen within the US, there’s an increasing chance that write backs might be on the cards, particularly in light of high provisions forgot last year.

Investment banking

Investment banking revenues have also been strong across the pandemic because of increased market linked activities. Given the strong investment banking revenues in US peers, expectations are for those banks with large investment banking businesses to ascertain a robust performance – namely Barclays and NatWest.

Net Interest Income

Given that UK interest rates remain at 0.1% a historically low level, net interest income for the banks is predicted to stay depressed. However, mortgage lending has been strong because of the UK’s mini housing boom. this is often particularly excellent news for Lloyds.

Card spending is additionally likely to be learning as consumers looked ahead to the easing of lockdown restrictions. Retail sales data today revealed that sales surged for a second straight month within the UK. The more of this that was on credit cards, the higher for the bank’s income.

Already priced in?

The question is, given the strong rally, whether tons of this excellent news has already been priced in? It could take further clarification surrounding dividends or the complete easing of lockdown restrictions for the share price to ascertain strong moves higher.

Lloyds formed a rising wedge pattern, which after hitting a post pandemic high of 45p, resulted during a price reversal. The reversal found support at 41p the 50 EMA on the daily chart and also the high November 25. it might take an opportunity below this level to negate the present uptrend and head towards the 100 EMA at 38p. a significant upside surprise and or unexpectedly strong guidance could see the worth head back towards 45p for a break-out to the upside.

After hitting a post pandemic low at 90p before, the worth has been trending higher, consolidating between 160p – 170p before extending gains to the post pandemic high of 200p this month. Bearish divergence with the RSI points to the market action losing momentum and weakening, potentially indicating a reversal. an opportunity below the 190p area, horizontal support and therefore the 50 EMA could see a deeper selloff towards 180p support from early March. A move higher could look to interrupt through resistance at 200p and head towards 210p A level last seen in mid February 2020.

Barclays, like a number of its peers has been trending higher since late October. After hitting a post pandemic high of 190p the uptrend has lost momentum and therefore the bias is more neutral before the results release. Upbeat earnings might be the needed catalyst to push the worth through tough resistance at 190p. Beyond here the uptrend could resume. Any disappointment within the numbers of the outlook must remove horizontal support and therefore the 50 EMA at 175 so as to seem towards 165p. it might take a move bellow 160p 100 EMA to negate the present uptrend. For now this looks unlikely.