Spotlight falls on two of Britain’s largest banks

Apr 21 2008 by Karen Dent, The Journal

SHAREHOLDER meetings held by two of Britain’s biggest banks will be watched closely while a raft of economic news will shed light on how the UK is coping with the credit crisis.

Reports that Royal Bank of Scotland is planning a multi-billion pound rights issue will put annual general meetings held by it and rival Barclays in the spotlight. Shareholders are expected to ask how they will ride out the credit crunch.

Both banks saw their 2007 AGMs dominated by talk on the takeover battle for Dutch group ABN Amro, later won by an RBS-led consortium.

This year, shareholders will focus on write-downs following the credit crisis and strategies for weathering the turmoil.

RBS addresses investors on Wednesday. One of the worst hit UK banks by the credit squeeze, it wrote off £2.5bn last year. Chief executive Sir Fred Goodwin’s pay package rose 5% to £4.2m despite the losses, which may draw criticism, with the rights issue rumours sparking talk that shareholders could demand his resignation.

But few can argue against RBS’s resilience, with a 9% increase in operating profits to £10.3bn last year.

Barclays’ AGM on Thursday could put the group under pressure to reassure investors about potential further losses.

On posting annual profits of £7.08bn, it said investment management arm Barclays Capital was vulnerable to £12.4bn related to the commercial property market and £1.3bn in exposure to US monoline insurers, which guarantee bond repayments.

Britain’s biggest pub company Punch Taverns reports interim results on Thursday, but more attention may be paid to its decision to call off all talks over a possible deal with rival Mitchells & Butlers.

Punch’s last trading update described its managed estate’s performance as “satisfactory”, with average profit per pub up 10%. But sales dropped 2.2% in the eight weeks to January 5.

The slackening pace of the economy will be in focus next Friday when GDP figures from the Office for National Statistics (ONS) are expected to show a third successive quarter of easing growth.

Minutes of the Bank’s April meeting due on Wednesday are expected to show a unanimous decision for its third rate cut in five months.

Thursday’s ONS retail figures for March may offer further evidence of high street pain for retailers.

Two pharmaceutical firms will update on how they are faring against competition from cheaper generic drugs. GlaxoSmithKline reports first quarter results on Wednesday, with AstraZeneca updating on Thursday.

GSK chief executive Jean-Pierre Garnier, who steps down at the end of May, warned heavier generic competition of its products would hit earnings. Its first quarter pre-tax profits are forecast to fall to £1.85bn from last year’s £2.14bn.

AstraZeneca is also fighting competition, with profits dipping 4% last year. It is forecast to post first quarter pre-tax profits of £1.12bn, marginally down on last year.