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Banks will be back in the spotlight next week when they report second-quarter profits. But if the pin-stripes in the boardroom were expected to suffer from a touch of nerves, they were not showing it.
That's because their profits are expected to show a big recovery on the previous quarter when they staggered under hundreds of millions of pounds worth of losses.
But longer term, the future might not be so rosy for the banking industry. Deutsche Bank's chief executive Josef Ackermann warns the banks are not out of the woods just yet. “Bad loans are the next wave. Banks that have fared relatively well so far will also be affected by this,” he said.
Germany's biggest lender, this week set aside €1 billion (£850 million) for risky loans in the second quarter. The seven-fold increase from a year ago and below-forecast revenue from trading saw the Frankfurt-based banking giant's shares suffer their biggest fall in four months earlier this week.
Ackerman also warned that banks that were forced to take government aid and are now encouraged to increase domestic lending may be more in danger from rising loan defaults than companies that can expand internationally and diversify risks.
Barclays, which kicks-off on Monday, rose 2.9p to 307.9p. Estimates range from zero to more than £5 billion with the driving force coming from Bar Cap, its investment banking arm.
Also reporting on Monday is HSBC, up 16.45p at 612.4p. Reporting later in the week will be state-controlled Royal Bank of Scotland, 0.16p easier at 44.56p and Lloyds Banking Group, 0.18p cheaper at 84.7p. Citigroup has added HSBC to its shopping list because it is keen on those companies exposed to cheap emerging markets and with potential for earnings growth.
But Credit Suisse has repeated its underperform rating on both RBS and Lloyds and remains worried about their future funding requirements.
Shares generally came off the boil after an early mark-up which saw them trade at their best levels since November. But the latest US GDP put paid to that. It contracted a further 1% in the second quarter which compares with a revised figure showing a decline of 6.4% during the first quarter. The FTSE 100 index suffered a relapse falling 17.07 to 4614.54, although the wider FTSE 250 Index managed to keep its head above water with a rise of 51.65 to 7986.28. But turnover was lacking with Graham Onions exploits at Edgbaston choosing to hold centre stage on traders screens.
Over on the bond market, the buyers chased the gilt future higher. Dealers say it has been outpaced by German bunds and US Treasuries and investors reckon it is now looking oversold. The September series touched £116.97, a rise of almost a full point on the day.
Anglo American touched 1950p following results and a firmer gold price, but subsequent profit taking and the absence of fresh news from Xstrata's bid approach left it nursing a loss of 7½p at 1897p. Meanwhile, Rio Tinto added 36p at 2498p and Lonmin 24p at 1384p.
The oil sector came under early selling pressure after Italy's ENI cut the half-year dividend.
Total of France also saw second-quarter profits slump by more than half, although this was above some analysts' expectations. Even so, that cut the ground from under UK oil explorers. BP fell 4.3p to 502p, Royal Dutch Shell lost 23p to 1572p in the wake of yesterday's profit numbers and subsequent comments from brokers. Goldman Sachs rates the shares a buy and has raised its target from 2350p to 2430p.
Publisher Reed Elsevier steadied the ship following yesterday's 13% plunge in the share price which greeted the news it was raising almost £700 million via a share placing at 405p.
The shares rallied 2½p to 422½p. S&P Equity Research has cut its target from 540p to 480p and rates the shares a hold. Bernstein has moved from 625p to 500p with an outperform rating while ING continues to rate the shares a buy but has lowered its sights from 590p to 475p. A few bargain hunters were sniffing around the pub chains.
Its unlikely they were buying the shares because they expected them to benefit from the warm, sunny weather. Weighed down by debt, they have been poor performers this year, but are trading above their lows. Enterprise Inns put on 11¾p at 140½p, Punch Taverns 7p at 103½p and JD Wetherspoon 7½p at 456¼p.
