Battle of the banks

Barclays is due to announce fourth-quarter results on Tuesday, with Lloyds following suit on Thursday. But will Barclays soar or will Lloyds gallop ahead?

In October, Barclays revealed a 26% drop in third-quarter pre-tax profits, with the UK retail division reporting a 2% decline and the investment banking arm a 53% decline. In 2013 this was not uncommon for banks, due to lower bond trading revenue. The share price is currently trading at 276p, slightly higher that it was before Q3 at the end of October. It was also hit by panic-selling surrounding emerging markets in January.

Barclays has recently been fined £291 million for a string of penalties, the stand-out in relation to allegations of attempts to manipulate the London Interbank Offered Rate while other offences included the mis-selling of payment protection insurance (PPI) and interest rate swaps. If the bank reveals further fines, or provisions for fines, it could weigh on the share price. As noted by Alastair McCaig, the bank has already been tightening its belt and reducing its staff numbers which shows the company is doing what is necessary to remain competitive, but despite this the share price has been in a downtrend since April. The 270p mark is offering support with baseline bidding taking place at 250p, but breaking 300p would help put it in good stead for a higher high.

Barclays chart

Lloyds is in a strong up-trend since bottoming out in June 2012. As I discussed previously, it also slipped when emerging markets’ fears kicked in, but is now finding support at 80p and 75p. Though there is currently a resistance at 85p, its recent promise to pay dividends on 2014 is likely to work in the bank’s favour.

Lloyds Banking Group chart

I think Lloyds is better positioned than Barclays, as the share price has a much stronger upward trend. Its recent admission about additional PPI provisions has already taken the sting off this week’s announcements and, as the government looks to unwind its shareholding, it is likely to remove the invisible cap on the share price. 

In a surprise move on Monday morning, Barclays decided to release some of its figures early, announcing full-year adjusted profit before tax of £5.2 billion in 2013 which compares with analysts’ expectations of £5.4 billion. Full details will be released tomorrow at 7am as planned, but this unexpected announcement strikes me as a way of cushioning the blow. 

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