The Big Four UK Banks have been on every London investor’s mind lately. Will they miss expectations? Will they beat? And how will the bank shares react? You don’t have to guess any longer, because RBS results are in and the market has had its verdict. And from the UK Index ‘s point of view, RBS results got a resounding stamp of approval (shares +3.2% at their best today).

But why what the market reaction so upbeat? And are there any lessons in today’s share price moves for HSBC, Lloyds and Barclays next week? Let’s take a peak behind the numbers.

On the face of it, Q4 results were mixed. Operating profit swung to a £572m profit. Positive, right? But net interest margin (NIM), a key measuring metric for banks, fell 15 bps from a year ago. At the same time, NIM rose +2 bps in the last quarter.

What really swayed the investors (maybe you too?) was the fact that RBS announced a new 3.5p final dividend and a 7.5p special dividend. As a result, this equates to a chunky 4.5% yield for 2018. Furthermore, consensus has it growing to 5.4% for 2019. If you hold RBS shares by 21 March ex-dividend date through CFDs, you can to receive the payout 29 days earlier than regular shareholders.

So, the overall message from RBS can be summarised as: we’ve had a tough year, but things are getting back on the right track. No new PPI provisions, finances are stronger, dividends increasing, and the shares go higher. CEO Ross McEwan can still make improvements, especially in terms of hitting long-term targets. And Brexit makes things more difficult for all banks. But signs of progress are definitely there.

Are we going to see something similar for other big banks next week? I always like to remind myself not to judge whole sectors identically. Yes, sector read-across is a real phenomenon and stocks often move higher or lower as a reaction to their peers. But financial results are a commercial event. Consequently, each bank has its own commercial specifics.

RBS is mainly a retail & business bank. Lloyds depends on the health of the UK’s mortgage market. Barclays has a strong investment banking exposure. HSBC makes most of its money in Asia. Sure, some things apply to all of them. Bullish investors want to see higher revenue and profit, lower costs, bigger dividend, optimistic outlook and no new PPI provisions.

What does the market expect from Lloyds next week? Here are some things to pay attention to:

• Brokers at Jefferies are looking for a bigger than expected share buyback around £2bn
• Analysts are Hargreaves Lansdown suggest to keep a close eye on Brexit commentary
• Bank’s large mortgage lending book and bad loans can also come into focus.

That’s just a quick snapshot of market’s consensus on Lloyds and other banks reporting next week and there is more colour available on-demand (just get in touch with me).

More importantly, what do you think about upcoming banks results? Are biggest shareholder returns on the cards for Lloyds? If the market’s reaction to RBS results is a useful measuring stick, the market would love a bigger buyback.

So, keep an eye on the bank-related headlines. And if you feel like there is a trading opportunity, get in touch with me. Here at Accendo Markets, we don’t just execute trades for you, but also provide a comprehensive research service.

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Avin Nirula, Trader, 15 February 2019