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What To Expect From HSBC Holdings plc And Royal Bank of Scotland Group plc’s Results

As bank reporting season gets under way, HSBC Holdings (LSE: HSBA) (NYSE: HSBC.US) is in the news for all the wrong reasons.

Results for 2014 will be with us on Monday, 23 February, but it comes at a time when the Geneva office of HSBC Private Bank (Suisse) has been raided as part of an inquiry into alleged money laundering after claims emerged that HSBC had been helping wealthy customers avoid tax.

Solid forecasts

Overshadowed though the results might be, the City’s pundits actually have a pretty attractive picture painted for for HSBC over the next few years. With healthy single-digit rises in EPS predicted for three years in a row and a dividend yield that could reach 6.5% by 2016, there seems less and less chance of the much-feared Chinese slowdown having any real adverse effect.

In fact, China’s economy is still motoring along at a growth rate of close to 7.5% per year, which is pretty much in line with the government’s aim.

Still, investors will be fearing the possibility of hefty fines should any misdeeds prove to have been committed. But it is only one subsidiary, part of a worldwide company worth nearly £116bn.

HSBC shares are down 8% over 12 months, to 607p, as I write.

Unshredding

Things are different at Royal Bank of Scotland (LSE: RBS)(NYSE: RBS.US), where we’ve seen a 7% price rise to 395p over 12 months, ahead of 2014 results due on Thursday, 26 February.

The recovery at RBS is coming along slowly but surely, and we’re on for a return to profit for 2014 with EPS of around 39p being guessed at. Q3 time brought in a third successive quarterly profit, with a pre-tax profit of £1.27bn booked — the bank was still losing big money in the same quarter a year previously.

RBS also told us its balance sheet risk had been lowered further, and that its capital ratios were moving in the right direction — in December’s Bank of England stress tests, RBS scored well with its Q3 CET1 capital ratio of 10.8% and told us it is on target for “CET1 capital ratio targets of 11% by end 2015 and at least 12% by end 2016“.

Forecasts for 2015 suggest a 17% fall back in EPS and the year should bring in the first dividend since the crisis, albeit with a yield of only 0.5% — there certainly won’t be a 2014 dividend.

Not cheap

RBS shares are on a P/E of 12 based on 2015 forecasts, and that doesn’t look especially attractive to me at this stage in its recovery — but maybe we’ll be pleasantly surprised when we get the results.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.