What to look out for from upcoming Q1 2023 FTSE 100’s banks updates.
The FTSE 100’s banks are set to report Q1 2023 results in the coming days and weeks, with Standard Chartered kicking off on Wednesday.
FTSE 100 bank reporting dates:
- Standard Chartered (LON:STAN) – Wednesday 26th April
- Barclays (LON:BARC) – Thursday 27th April
- Natwest (LON:NWG) – Friday 28th April
- HSBC (LON:HSBA) – Tuesday 2nd May
- Lloyds (LON:LLOY) – Wednesday 3rd May
What to watch out for
Deposit inflows/outflows
Q1 banking earnings and commentary will be primarily dominated by the mini-crisis that started in the US with SVB and culminated with UBS’s takeover of Credit Suisse.
The inflows or outflows of deposits will gauge confidence in each UK bank during this period. As panic swept through the banking system over three weeks in March, depositors rushed to move their cash into institutions deemed ‘safer’ than others caught up in the crisis.
The impact on UK bank deposits isn’t expected to be as pronounced as for US and European banks, but any changes in deposits will be a fascinating insight into the perception of each institution.
The FTSE 100 banks are broadly considered high-quality institutions and outflows will be minimal. Indeed, the five FTSE 100 banks mentioned are more likely to have received inflows.
Net interest margin
A key profitability metric, net interest margin (NIM) for the period will dictate banks’ financial performance. Comparisons to the same period a year ago will show dramatically higher NIMs after a series of rate hikes throughout 2022. The Bank of England and the Federal Reserve both hiked rates in Q1, so one would expect an increase in Q1 2023 NIMs compared to Q4 2022.
Any comments on the outlook for NIM will be closely watched after many UK banks said they saw limited improvement in NIM for the 2023 full year compared to the last half of 2022.
Profits for
Bad debt provisions
The outlook for the global economy saw provisions for bad debts increase in the last round of quarterly updates from UK banks. There is an expectation these provisions will be maintained, or even increased.
Provisions will impact profit before tax, and if banks decide to bolster provisions, the benefits of higher NIM could be offset.
There has been a mild improvement in the economic outlook globally so any fresh provisions shouldn’t be overly dramatic.
A consensus of analyst estimates sees Barclays setting aside £563m and NatWest £250m.
Investment banking activity
Investment banking activity considerations are really only reserved for Standard Chartered, HSBC and Barclays, with limited or no contribution to earnings at NatWest or Lloyds.
The poor state of financial markets in Q1 led to a depressed environment for corporate activity, which would have made advisory fees hard to come by.
Equity and fixed-income activities are also likely to be lower than in the same period last year.