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UK banks earnings preview: where next for the Barclays, Lloyds and RBS share prices?

All three lenders are set to unveil their Q3 earnings next week and, with all stocks making gains after Boris Johnson agreed a new Brexit deal, their stocks could climb higher if results meet expectations.

London Source: Bloomberg

Barclays, Lloyds and the Royal Bank of Scotland (RBS) saw their shares climb higher this week after the UK Prime Minister secured a new Brexit deal.

RBS benefitted most from the news, with its stock rallying more than 8% to 234p over the last five trading sessions, while Lloyds and Barclays climbed 5% higher, currently trading at 60p and 165p respectively.

All three lenders release their Q3 earnings next week and, with the prospect of Britain leaving with a deal on October 31, if the bank’s record a decent set of results their shares could climb even higher.

However, the UK banking environment remains challenging. British lenders are still contending with margin pressure in UK mortgages, increased regulatory scrutiny driving up the cost of compliance and low interest rates and a slowing of global economic activity hurting overall profitability.

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PPI cloud still hovers over British banks

PPI threatens to spoil the banks Q3 earnings next week, with the scandal costing UK lenders billions in compensation claims already. Lloyds has suffered particularly hard, with the bank forced to pay out around £2.5 billion, forcing it to suspend its share buyback programme.

In a note to investors on Thursday, Deutsche Bank said that charges related to PPI will likely be a key focus for investors when UK banks unveil their latest set of figures.

The German investment bank also warned that it expects UK banks to see ‘further pressure’ on margins but added that they would find some relief from increased volume growth.

MPs ready to vote on Johnson’s Brexit deal

British lawmakers will vote on Boris Johnson’s new Brexit deal on Saturday. However, MPs will not have the chance to see the official impact assessment of the new deal prior to voting on it.

If MPs vote down the deal, Johnson will be forced to ask Brussels for yet another extension which will see the Brexit deadline pushed back to January 2020.

President of the EU Commission Jean-Claude Juncker said earlier this week that he wished to rule out any further delay to Brexit and block an extension, though EU member states declined to echo his sentiments.

German Chancellor Angela Merkel was quick to tell EU leaders that a Brexit extension is unavoidable if British lawmakers reject the deal in the House of Commons on Saturday.

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