The sector has long been struggling with Brexit woes but the coronavirus pandemic has changed the landscape completely, with peers Barclays, Lloyds, and HSBC all posting slumps in quarterly profits this week amid worries over loan defaults.
“The implementation of the UK lockdown was the catalyst and unlike their US peers, their investment banking divisions have seen themselves scaled back in the past few years, which means they are much more vulnerable to the sharp contraction that is coming our way in the second quarter,” Michael Hewson at CMC Markets commented.
Westminster could backstop any new lending that the banks need to do to keep the economy on life support, but the real problems are consumer credit and provision for credit losses, Hewson added.
Analysts expect RBS to take less than £700mln of impairments, with pre-provision profits more than halved to just below £1bn from the £2.2bn seen in the last quarter of 2019.
With the corporate diary otherwise looking bare after a busy week of news, economic data will provide the other interest on the first day of May, with UK and US manufacturing purchasing managers indexes (PMI) set to be released.
Analysts expect the reading for British manufacturers to be similar to last month’s 32.9, as partial shutdowns continue to hit the sector.
Significant announcements expected on Friday May 1:
Trading announcements: Royal Bank of Scotland Group PLC (LON:RBS)
Economic data: UK manufacturing PMI; US manufacturing PMI