Friday preview: RBS to report first quarter loss, analysts estimate

The Royal Bank of Scotland is expected to report a wider first quarter loss on Friday, reflecting a £1.25bn payment to the Treasury.

The City estimates a first quarter loss of £957m, compared to a loss of £446m for the same period in 2015.

The loss is largely due to a payment to the Treasury to buy out a crucial part of its £45bn bailout. The 73%-state owned bank is making the payment to end a golden share agreement with the government, made in 2009, which prevented the lender from paying dividends to any shareholders before the Treasury.

“Now that the UK government no longer has this special access one obstacle to a resumption of dividend payments to shareholders has been removed, however the bank still needs to start turning a profit before that can happen,” said Michael Hewson, chief market analyst at CMC Markets.

Deutsche Bank (DB) said in the longer term RBS will be a “significant dividend/buyback-payer”. Although DB believes dividends are likely to be relatively modest in the beginning.

“However, it is also increasingly clear that for the next 12-18 months RBS will not be able to distribute capital, and needs to run at a higher common equity tier 1 ratio (CET1) for longer whilst it waits for the Williams & Glyn (W&G) exit and settlement (on claims in the US that it misled investors in residential mortgage-backed securities) to complete.”

Ahead of its results, RBS has warned that it is likely to miss the 2017 deadline to spin off its W&G subsidiary, laying the bank open to a "significantly greater" financial impact than hoped, including further delaying the resumption of dividends.

RBS, which is being forced by the European Commission to sell the unit as a condition of its 2008 state bailout, said it felt there was now a "significant risk" that the separation and divestment will not be achieved by the 31 December 2017 deadline.

DB expects part of the focus in the first quarter results will be on the group’s divestment from W&G. Investors will also be looking revenue stability following a weaker performance in the fourth quarter as well as litigation costs, the analyst said.

DB estimates a 16% fall in group revenue, due to lacklustre performances at Corporate & Institutional Banking and Personal & Business Banking businesses.

“We forecast adjusted pre-tax profit of £732m for 1Q16, slightly below consensus (£804m), and down year-on-year driven by income (at £3bn), operating expenses (£2.18bn) and modest impairments (£47m).”

DB also predicts £250m restructuring expenses for the quarter and £1bn of litigation and conduct charges.

“However the timing of below-the-line items (particularly on litigation) could be different, impacting CET1 and total net asset value in 1Q16 (we forecast 14.9% and 330p respectively).”

Friday April 29

INTERIM DIVIDEND PAYMENT DATE
Abbey, Henderson EuroTrust, Manchester & London Investment Trust, Marwyn Value Investors Limited, Softcat, UK Mortgages Limited , Wolseley

QUARTERLY PAYMENT DATE
Albion Technology & General VCT, Ediston Property Investment Company, Middlefield Canadian Income PCC, Schroder Income Growth Fund, Torchmark Corp., TwentyFour Select Monthly Income Fund Limited

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Chicago PMI (US) (02:45)
Consumer Sentiment (US) (15:00)
Personal Consumption Expenditures (US) (13:30)
Personal Income (US) (13:30)
Personal Spending (US) (13:30)
Retail Sales (GER) (07:00)
Unemployment Rate (EU) (10:00)

FINALS
Flowgroup

ANNUAL REPORT
Plaza Centers NV

IMSS
COLT Group SA

SPECIAL DIVIDEND PAYMENT DATE
Manchester & London Investment Trust, Octopus Titan VCT

EGMS
BBGI SICAV S.A. (DI)

AGMS
Alpha Pyrenees Trust Ltd., Asian Total Return Investment Company, AstraZeneca, BBGI SICAV S.A. (DI), BlackRock Latin American Inv Trust, FBD Holdings, GLI Finance Limited, Laird, O'Key Group GDR (Reg S) (WI), Pearson, Ultra Electronics Holdings

TRADING ANNOUNCEMENTS
Rotork, Royal Bank of Scotland Group, Ultra Electronics Holdings

UK ECONOMIC ANNOUNCEMENTS
GFK Consumer Confidence (00:05)
M4 Money Supply (09:30)
Mortgage Approvals (09:30)

FINAL DIVIDEND PAYMENT DATE
Amino Technologies, EMIS Group, Glanbia, Hammerson, Maven Income & Growth 3 VCT, Maven Income and Growth VCT 5, Octopus Titan VCT , Old Mutual, Real Estate Investors, SpaceandPeople, Wynnstay Group

FINAL EX-DIVIDEND DATE
Servelec Group

Q1
AstraZeneca, International Consolidated Airlines Group SA (CDI), International Consolidated Airlines Group SA (CDI), Royal Bank of Scotland Group, Shire Plc, Telefonica SA