May 3, 2016

Pegler’s market report – 03.05.16: The banks feeling the pinch

by David Pegler

in Insights Press Releases

As published in the Brighton Argus (03.05.16) Business on page 21 under the title Pegler’s Market Report:

The banks feeling the pinch

Royal Bank of Scotland’s losses more than doubled to £968m for the first quarter of the year, as it shelled out fees of £1.2bn to the Government, clearing some of the debt from its bailout in 2008. Another bank feeling the pressure was Deutsche Bank – profits sank by more than half in the first quarter, as poor market conditions combined with its ongoing struggle with internal reforms shredded earnings. Elsewhere in the banking sector, Lloyds posted pre-tax profits of £645m compared with £1.2bn. a year earlier, and Barclays faired a little better with a figure of £902m, which was ahead of market expectations.

It was a bad week for the Restaurant Group, which owns the Frankie & Benny’s chain as the mid-cap leisure company slashed its full-year guidance and warned there would be no improvement in the short term. It also said its chief financial officer has left with immediate effect and that a strategic review is underway.

Taylor Wimpey shrugged off widespread fears among some of its peers that uncertainty over Britain’s membership of the European Union was causing a slowdown in the housing market after reporting that demand for its new build homes surged 14pc in the first four months of the year.

Global markets were spooked by news that US billionaire activist investor Carl Icahn sold his entire stake in Apple due to the risk of China’s influence on the high-profile technology stock. Over a week ago, China shut down Apple’s iTunes movies and iBooks stores in line with new regulations the country introduced in March to curb online publishing.

Other overseas company news: Volkswagen’s boss has sketched out a wide-ranging transformation of the company that will see it focus more on electric vehicles and services like car-sharing as it seeks to get past a scandal over cheating on diesel emissions tests.

For those investors catching up on the most recent FOMC statement, the Fed left interest rates unchanged as expected. The US central bank expressed confidence in the US economy, leaving the door open to a potential rate rise in June.

By David Pegler, Brighton Capital Management