Lloyds Banking Group (LLOY)                                                                                    Q1 Results: 25 April

Lloyds shares jumped almost 4% in response to full year results on 21 Feb as shareholders welcomed news of higher profits, a 20% increase to the full year dividend and a £1bn share buyback. An annual dividend yield >5% means the shares are now highly attractive to income seekers, especially given the prospect of further profit increases leading to even higher dividends and capital returns.

PPI may not yet be water-under-the-bridge but the scale of provisions has fallen markedly, FY results not including any big surprise since the Q3 results in October. That said, an August 2019 deadline for claims does mean potential for a spike in claims as people rush to seek redress for historic mis-selling of payment protection insurance before time runs out.

It would have been possible to maximise potential returns from Lloyds’ post-results rally using a CFD. With the shares climbing as high as 3.7% on results day, if you had opened a £10,000 long position at 67.5p the prior day using a £500 deposit, closing the trade just below the results day peak of 70.4p, you could have made a circa £400 profit (80% return on £500 deposit) before commission and overnight financing costs. Note: If the shares had fallen to the same degree, you would have incurred an equal and opposite loss

Barclays (BARC)                                                                                                               Q1 Results:26 April

Barclays shares rose over 6.4% when it reported FY results on 22 Feb, with investors focusing on a pledge to double the dividend rather than the bank having swung to a full year loss, the key investment banking division suffering from weak trading performance, further litigation costs, a charge related to US tax reforms and the sale of its Africa operations.

Investors were perhaps relieved to hear that the return of market volatility was already helping trading in the first few months of the year, a trend that should have continued (US banks results so far suggest this to be the case), which bodes well for the pending Q1 results of UK banks, especially Barclays.

Brokers like Investec suggest (Source: Dow Jones, 22 Feb) the bank’s recovery is likely to accelerate even in the wake of a messy set of FY results, helped by a clearing of clouds including the recent settlement with the US Department of Justice (DoJ) regarding mis-selling of Retail Mortgage Backed Securities (RMBS) before the financial crisis – as well as outstanding investigations into emergency fundraising and internal attempts to discover a whistle-blower.

Had you bought Barclays shares at 201p the day before FY results on 22 Feb – using CFDs to maximise your potential returns, opening a £10,000 long position using just a £500 deposit – you could have closed the position the next day at anywhere between 208p and 215p. The share price rise of between 3% and 7% could have generated returns of £340-690 (before commission and overnight financing costs) implying a return of 68-138% on your £500 deposit. Note: If the shares had fallen to the same degree, you would have incurred an equal and opposite loss

Royal Bank of Scotland (RBS)                                                                                     Q1 Results:27 April

Unlike Barclays, RBS still has to settle with the US Department of Justice (DoJ) for its own conduct issues. It may well have posted its first full year profit since being bailed out a decade ago, but the overhang from litigation risk proved too much for investors and the shares closed lower for the day. With profitability not quite sustainable to allow for dividends just yet, and dividends having to come before share buybacks, the only real catalyst comes from progress in terms of agreeing to pay up and allow everybody to move on.

You could have elected to buy RBS shares 10-days before last April’s Q1 results (27 Apr) – using CFDs to maximise potential returns from a pre-results rally. This often happens, with traders/investors speculating on the possibility of a good set of results and favourable share price reaction. You could have taken a £10,000 long position with a £500 deposit at 229p, and closed out at 252p making the most of the 10.9% rally, standing to make over £1000, before factoring in commission and overnight financing costs, essentially doubling your £500 deposit. Note: If the shares had fallen to the same degree, you would have incurred an equal and opposite loss

HSBC (HSBA)                                                                                                                     Q1 Results: 4 May

HSBC shares also closed lower in response to February’s Full year results, due to pre-tax profits coming in below market consensus, bad loans (Steinhoff, Carillion) weighing on profits, the bank announcing a $5-7bn capital raising to bolster the balance sheet, but no mention of more share buybacks. The latter was a disappointment given that expectations were for as much as another $3bn.

It was also the last set of results under 7yr CEO Stuart Gulliver (retired), which represents risk in terms of a new man at the wheel (John Flint). Can he maintain the recovery from 2012 lows when the shares were hit by major conduct issues and scandals which hurt the bank for a while.

CFDs could have been used to maximise potential returns from the 10-day run-up to FY results on Feb 19 with a £10,000 long position, opened at 730p, using a £500 deposit, and closed at 760p delivering a 3.8% return or £410 versus your £500 deposit (82% return), before commission and overnight financing costs. Note: If the shares had fallen to the same degree, you would have incurred an equal and opposite loss

Over the page, we look at the technicals for our UK banks.

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