EU summit, UK bank results, Walmart earnings
The FT's Vanessa Kortekaas on the top stories making the news in the week ahead, including EU leaders meeting in Brussels to discuss the bloc’s long term budget and the union's future leadership.
Filmed by Rod Fitzgerald and Petros Gioumpasis. Produced by Vanessa Kortekaas. Still images by Getty and Bloomberg.
Hello, and welcome to The Week Ahead from the Financial Times in London. Here are some of the big stories we'll be watching in the coming days. EU leaders are meeting in Brussels to discuss how they'll fill the gap in the bloc's budget after Brexit. We'll get a health check from several of the UK's biggest banks. And how is the world's largest retailer faring? We'll find out when Walmart reports its quarterly results.
Let's start in Europe, where EU leaders are set to meet in Brussels on Friday for a summit about the union's long term budget and future leadership. The gathering will be the first time the heads of government of the 27 member states debate what to do about the gap created in their trillion euro budget after Brexit. Big net contributors, such as Germany, say there may be a need to contribute more in the coming years. But the size of any increase is highly contentious.
Other EU members, including the Netherlands, Finland, and Denmark, would prefer to cut back spending in areas such as farm subsidies, infrastructure, and science research. Separately, the group will examine the difficult question of how to appoint the next president of the European Commission, which is the union's executive body. Here's Alex Barker, our Brussels bureau chief, with more on what to expect.
The EU's trillion euro long term budget is always one of the most difficult things to negotiate in Brussels. And this time around, it's even harder because of Brexit - that's leaving a big gap that the EU member states need to decide whether to fill or to cut back on spending projects. This week, the big decision for the leaders at the summit will be broadly how big the budget should be. And secondly, how quickly they want to reach an agreement.
Usually, it takes about 18 months to two years. It's incredibly fraught. This time, they think maybe they can accelerate things and reach an agreement before the European elections in May next year.
Now there will be a slew of banking results out this week to watch. HSBC's annual results will be the last ones presented by chief executive Stuart Guiliver, who will be handing over to John Flint, the current head of retail banking and wealth management. Mr Guiliver looks set to go out on a high with analysts expecting HSBC to break an almost decade long decline in revenues and report top line growth of 8% and a more than doubling of pretax profits to 17.9 billion dollars.
Investors in Lloyd's Banking Group will find out more about its new three-year strategy, particularly the bank's efforts to ramp up its digital initiatives. Elsewhere, Barclays is expected to report a slight increase in pretax profits to 4.7 billion pounds, that excludes conduct and litigation costs, while Royal Bank of Scotland is expected to announce a 4% rise in revenues and a move from a heavy operating loss to an operating profit of 1.1 billion pounds. Here's our banking editor Martin Arnold to explain why investors should be looking forward to the results.
It's going to be all about returning capital to shareholders. We start the week with HSBC on Tuesday. And they're expected to announce a $3 billion share buyback, extending their policy of returning excess capital to shareholders. That's followed by Barclays, which cut its dividend two years ago. And they're expected to bounce that dividend back up.
Lloyd is also expected to increase their dividend. They're strong dividend payer already, but they're expected to continue increasing that. Finally, RBS. No dividend expected from them yet. But they may well signal that there's potential for a dividend payout at the end of this year, if they make a profit as expected. So all in all, UK banks are starting to catch up with their US rivals, who have been paying out as much as 100% of their earnings to shareholders for the past year.
And finally, US retail giants Walmart and Home Depot are both due to provide an earnings update this week. Walmart's quarterly results will include the crucial holiday sales season and provide some clues about whether its investment in e-commerce is paying off. Walmart shares have already climbed 26% in the past six months on the back of better than expected sales results.
And we'll see if Home Depot is still benefiting from a bright spot among broader retail malaise. With a strong labour market and historically low level of homes for sale in the US, people have been spending more money on their homes. Sales of items such as lumber and appliances have also shielded it from Amazon e-commerce competition, which has ruffled other retailers. Here's our reporter, Anna Nicolau, with more.
This week Walmart reports its earnings for the last three months of last year. And this will follow up on three very strong quarters for Walmart It had a lot of momentum towards the end of last year as they were growing sales faster than expected. They're also showing good progress on e-commerce, which is a big question for them as they battle with Amazon for online shopping.
The other thing is that this will be for the holiday period of December. And so far, we've seen very positive news from the holiday shopping season. A lot of retailers, even though they had a pretty poor year in terms of retail in general with a lot of bankruptcies and foreclosures, it seems like the holiday shopping season was very good last year. So people will look to Walmart as the world's biggest retailer to see if they also felt that positive news.
And that's what the week ahead looks like from the Financial Times in London. See you again next time.