Previous share price reactions

HSBC (HSBC) – Reports 20/02

A year ago, HSBC’s full-year results were headlined by a 62% decline in profits from a year earlier, including a £2.8bn loss in Q4, further blighted by the announcement of a much smaller than expected share buyback.

The bank attributed the sharp drop in profits to a number of one-off charges, including the sale of its Brazilian business, as well as announcing a new FCA probe into money laundering. Management highlighted concerns over a number of global trends, including increased global protectionism, led by the US and President Trump. Shares suffered dramatically after the release of last year’s full year results. By the end of the session, shares had fallen 6.5%, the bank’s single worst session since the Chinese stock market sell-off of August 2015.

It was a significantly better affair following both Q1 and Q2 results, as shares rallied 3.0% and 1.8% respectively.

Q1 results were highlighted by an increase in underlying profits and a further $1bn share buyback programme, shrugging off a $210m provision for PPI, while Q2 saw another $2bn share buyback pledge. However, shares fell 1.1% following Q3 results in October as an increase in costs to cover bonus payments offset a rise in revenues.

A CFD could have been used to maximise potential returns from the post-FY results move in HSBC shares. A £10,000 long position, opened at 665p using a £500 deposit on the day of results and closed at 770p Summer 2017 highs, would have made a £1500 profit before commission and overnight financing costs. Should shares have fallen by the same amount, you would have incurred losses of an equal magnitude.

Lloyds Banking Group (LLOY) – Reports 21/02

Lloyds announced that profits reached their highest level since the financial crisis in February 2017, headlining a full year results release that was well met by investors. Profits more than doubled on the previous year as it managed to avoid further charges for PPI mis-selling, while largely shrugging off the previous year’s Brexit vote. Investors were uplifted by the announcement, seeing the bank’s shares climb 4.4% by the end of the session.

It was more of the same following Q1 results in April. Lloyds announced yet another doubling of profits year-on-year, this time helped by a large one-off cost the previous year. Shares rallied 2.4% in reaction to the release.

The picture was less rosy following the half year results in July. Shares fell 2.3% after the bank missed analysts’ expectations, despite an increase in both profit and revenues, while announcing a £1.05bn provision for PPI repayments and a further £540m for other conduct provisions. It was back to positivity in October, albeit a quiet 0.8% move higher, as the bank announced Q3 profits of £1.95bn, +141% YoY and ahead of market estimates.

It would have been possible to maximise potential returns from the post-results rally in Lloyds shares using a CFD. With the shares climbing 4.4% on the day, if you had opened a £10,000 long position at 67p the previous day using a £500 deposit, closing the trade at the day’s closing price of 69.7p, you could have been able to make a £400 profit before commission and overnight financing costs. Note, should shares have moved against your trade by the same amount, you would incur losses of an equal magnitude.