We are a few days into bank earnings season that has already seen Lloyds (LON:LLOY) and Barclays (LON:BARC) announce increased profits with RBS (LON:RBS) and HSBC (LON:HBSA) due to release their earnings reports imminently.
How have earnings fared so far?
Both Lloyds and Barclays reported an increase in profits for the first nine months of the year, by 50% and 19% respectively. Both of these results were in line with expectations.
Lloyds maintained their provisions for PPI costs in the third quarter and Barclays reported reduced costs of, and provisions for, PPI compared to the year previous.
Moreover, Lloyds was able to increase their net interest margin by 13 basis points, successfully taking advantage of lower deposit and wholesale funding costs as well as benefits from their acquisition of MBNA. This is in contrast to Barclays who experienced an 8 basis point drop.
Both banks were able to report an increase in their Common Equity Tier 1 (CET1) capital ratios compared to December 2016. Barclays CET1 capital ratio rose 0.7% to 13.1% as Lloyds saw a 0.3% rise to 14.1%.
Despite Barclay’s improvement concerns about future CET1 Ratio weighed on shares on Thursday.
What to expect next?
Based upon the reports of both the banks mentioned previously there are a number of things to note looking forward.
Lloyds experienced a higher than their own forecasts, which would suggest that the impact of the regulatory changes and the Financial Conduct Agency’s media campaign had a larger impact than was predicted. This may lead to other banks announcing increases in their provisions and payments for PPI claims.
Barclays also commented in their report that “a lack of volume and volatility in FICC (Fixed Income, Currencies and Commodities) hit Markets revenues hard across the industry”. This is likely to hit the market businesses of other firms equally as hard.
As for share results for both companies it was a mixed bags. After taking an initial hit, Lloyds managed to finish the days trading 0.75% up, despite taking a huge hit at the start of Wednesday. This is contrast to Barclays who were unable to rally after their share price fell drastically, down 6% at the time of writing.