(Bloomberg) -- Political paralysis in France and a new left-leaning government in the UK alter the landscape for BNP Paribas SA, Lloyds Banking Group Plc and NatWest Group Plc, who take up the mantle from Wall Street and Nordic banks this week.
While tax fears cloud the outlook for France’s biggest bank, British lenders may be able to better weather the instalment of a Labour government under Prime Minister Keir Starmer, according to Bloomberg Intelligence’s Tomasz Noetzel.
Deutsche Bank AG’s legacy legal risks hang over its report, due Wednesday, and Banco Santander SA’s loan loss provisions likely swelled, especially in Latin America. UniCredit SpA’s cost discipline probably stood in its stead, a factor that helped propel the Italian firm into the top five performers in the Stoxx Europe 600 Banks Index this year.
Ryanair Holdings Plc painted a bleak picture for airlines on Monday, cutting its forecast for fares in the crucial summer travel period.
The luxury sector, still licking its wounds after warnings from Burberry Group Plc, Hugo Boss AG and Swatch Group AG, faces more scrutiny when LVMH and Hermes International SCA report, as feeble demand pressures margins.
German chemical maker BASF SE’s shares got a momentary reprieve last week, after peer Lanxess AG reported preliminary results that far outstripped estimates, although uncertainty about China is keeping its stock in the doldrums. BASF’s report is due on Friday.
Software giant SAP SE and Swiss private bank Julius Baer Group Ltd are also awaited.
Highlights to look out for:
Monday: Cloud demand probably helped push SAP’s (SAP GY) sales up 9.4% to €8.3 billion ($9 billion) in the second quarter, powered by a 25% jump in cloud revenue, consensus shows. Backlog gains could offer a shield against weakness in the economy as the company migrates more legacy customers to the business, said BI, which sees a lower chance of deferrals for SAP than other software providers.
Tuesday: LVMH’s (MC FP) ability to defend profit margins in the face of sluggish demand will be put to the test in its quarterly update, UBS analysts said. Sales growth in the core Fashion and Leather Goods division likely limped along at a 2% pace, with growth in Japan tempered by more muted trends elsewhere, according to analysts at Barclays.
Wednesday: Deutsche Bank’s (DBK GY) legal risks are high on the radar, after it flagged a €1.3 billion provision for the second quarter. BI lists Cum-Ex litigation, a Polish mortgage matter, a Postbank shareholder case and RusChemAlliance claims. As far as results go, a “solid quarter” is in store, putting its full-year revenue guidance of €30 billion within reach, Warburg analysts said. Consensus points to less than 2% gains in fixed income and currencies sales and trading revenue and group net revenue to €2.15 billion and €7.5 billion, respectively.
- BNP Paribas (BNP FP) faces a high bar amid impending rate cuts, rising impairments and political uncertainty in France, BI said. Investors fear a potential new wealth tax or a bank levy. They’re also concerned about regression on capital and banking union in the European Union. While group revenue should have increased, retail revenue is expected to dip in the quarter, with France and Belgium driving the decline.
- Banco Santander’s (SAN SM) net interest income could beat estimates once again, although loan loss provisions remain a key threat, particularly in South America, BI’s Lento Tang said.
- UniCredit’s (UCG IM) cost discipline and risk management could help mitigate a sequential drop in second-quarter net income. The bank’s capital distribution target should be maintained and investors will be keen to hear about deal-making in the earnings call, BI said.
- Kering’s (KER FP) warning in April of a first-half profit slump has taken the sting out of its results, BI said. Any sign of improvement will be welcome, especially at Gucci. Sales at the label, the group’s biggest, likely slid 16% organically in the three months through June.
Thursday: Lloyds (LLOY LN) will probably report a stable 2.93% net interest margin in the second quarter, consensus shows. BI points to higher yields from its hedging program. How mortgage demand is holding up ahead of a possible Bank of England rate cut in August is also of interest.
- Julius Baer’s (BAER SW) half-year results will be indicative of the crisis the lender fell into after taking a CHF586 million ($659 million) hit on its exposure to the collapsed Signa property empire and its subsequent exit from the private debt business, all of which cost Chief Executive Officer Philipp Rickenbacher his job. Net new money is estimated to be less than half of what it reported a year ago. New leadership, cost cuts and client flows will top the agenda, BI said.
- Hermes’s (RMS FP) revenue and operating profit growth probably slowed in the first half, consensus shows. Falling demand for its ready-to-wear collections and silk and textiles products in Asia, and uncertainty ahead of the US election could add pressure, Citi analysts said. Hermes may be more resilient than peers with cheaper offerings, as its exclusive prices and unique designs preserve growth and margins, according to BI.
Friday: NatWest (NWG LN) could lift its full-year revenue guidance of £13 billion (£16.8 billion) to £13.5 billion as the BOE takes a more cautious approach to monetary easing, BI’s Tomasz Noetzel said. A re-rating of the stock is in the cards as the UK government hastens its exit from the bank, according to JPMorgan. NatWest’s CET1 ratio, and the implied wriggle room to buy back shares, will be another focal point.
- While BASF’s (BAS GY) sales volumes probably improved in the second quarter, destocking likely hampered the agricultural business, though the effects are seasonal, analysts at Warburg and Metzler said. Weak cash flow could imperil the 2024 dividend payout, so closing the €1.6 billion Wintershall Dea transaction in the fourth quarter is crucial.
--With assistance from Laura Alviž, Alexey Anishchuk, Paula Doenecke, Valentine Baldassari, Leonard Kehnscherper, James Cone and Christopher Elser.
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