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head of britain banks They are keeping an eye on the “eye of the storm” as they prepare to unveil their latest financial results, facing the dual pressures of rising credit stress in the US and the impending £11bn car finance compensation scheme.
Investors ready to scrutinize barclays‘Q3 earnings on Wednesday, followed by Lloyds Banking Group on Thursday and NatWest Group on Friday.
The anticipation comes after shares in the British banking giant fell sharply on Friday, leaving them underweight UKof the FTSE 100 index.
barclaysDue to its substantial US operations, its stock saw a decline of more than 6 percent.
Richard Hunter, head of markets at Interactive Investor, said UK banks were “in the heat of the storm following the US regional bank report, ahead of the third-quarter reporting season which starts next week”.
He said investors were on “high alert” after two US regional banks disclosed issues of bad and fraudulent loans, raising concerns across the region.
That sent shares in the region falling sharply and triggering a selloff in global stock markets amid concerns it could signal broader credit weakness.
Meanwhile, Lloyds is coming under pressure over its performance in the motor finance market in the UK.
Earlier this week, it told investors it would have to set aside an extra £800 million to cover estimated costs related to the UK regulator’s motor finance compensation scheme – bringing its total provision for the issue to £1.95 billion.
financial conduct authority have drawn up proposals for a redress scheme after it was revealed that almost £14million is outstanding in payments on unfair car finance deals.
It has been calculated that the total bill for the motor finance industry could reach approximately £11 billion as a result.
Peter Rothwell, Head of Banking kpmg ukSaid that “the recent turmoil in the motor market means investors will likely ask whether additional provision is needed for banks’ investments in this segment” when considering the plans.
barclayswhich has a low market share, has made provisions of £80 million.
santanderWhich, it reported later in October, had previously set aside £295 million for the issue and has yet to move to update that figure.
“Credit quality remains resilient overall, but attention will be paid to any areas that are showing signs of increasing stress,” Mr Rothwell said.
He said he was expecting banks to show that they can “deal with continued market volatility while maintaining profitability, making meaningful progress on their transformation agenda and keeping investors reassured on credit quality and emerging risks”.