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(Alliance News) - Lender Barclays kicked off the UK bank reporting season on Wednesday with the report of a more than halving in interim profit after it took a GBP3.7 billion credit impairment charge.
Total income for the first half of 2020 was up 8% to GBP11.62 billion, with operating expenses down 4% to GBP6.59 billion. However, pretax profit still dropped 58% to GBP1.27 billion.
Credit impairment charges increased to GBP3.7 billion from GBP900 million a year ago, including GBP1.6 billion in the second quarter, largely due to "revised IFRS 9 scenarios" driven by Covid-19.
The scenarios reflect "forecast deterioration in macroeconomic variables (including a prolonged period of heightened UK and US unemployment), partially offset by the estimated impact of central bank, government and other support measures".
Barclays UK income decreased 11% due to ongoing margin pressure, while Barclays International income increased 16%, with Corporate & Investment Bank income up 31% and Consumer, Cards & Payments income down 21%. Within CIB, Markets income increased due to a strong performance across FICC and Equities.
"Our CET1 ratio stands at 14.2% which underscores the strength of our balance sheet. Although we will remain well capitalised and ahead of our minimum requirements, we may experience stronger capital headwinds in the second half of the year. The board will decide on future dividends and capital returns at the year-end 2020," said Chief Executive Jes Staley.
Looking to the remainder of 2020, Barclays said its impairment in the second half will remain "above the level experienced in recent years", but below the first half credit impairment charge.
Barclays shares were down 1.1% early Wednesday.
Lloyds Banking and Standard Chartered report on Thursday, followed by NatWest - formerly RBS - on Friday and HSBC on Monday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 2.95 points at 6,132.21
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Hang Seng: up 0.4% at 24,862.90
Nikkei 225: closed down 1.2% at 22,397.11
DJIA: closed down 205.49 points, 0.8%, at 26,379.28
S&P 500: closed down 0.7% at 3,218.44
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GBP: flat at USD1.2933 (USD1.2930)
EUR: firm at USD1.1750 (USD1.1731)
Gold: firm at USD1,957.65 per ounce (USD1,953.15)
Oil (Brent): firm at USD43.38 a barrel (USD43.09)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's Key Economic Events still to come
UK Financial Policy Committee meeting.
0930 BST UK money and credit
0700 EDT US MBA weekly mortgage applications survey
0830 EDT US advance international trade in goods
1030 EDT US EIA weekly petroleum status report
1400 EDT US Federal Reserve interest rate decision
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Searches for homes with gardens have doubled in the UK since last year as prospective house buyers place more importance on outdoor space following lockdown, property experts have said. Homes with south-facing gardens were most in demand – selling more quickly in almost all regions of England, Scotland and Wales, a survey by property website Rightmove found. The study revealed that homes advertised with south-facing outdoor areas sold two days faster and were priced at nearly GBP23,000 more than those without. Property experts at Rightmove said data showed that searches on the website for homes with a garden had increased by more than 100% in June compared to June 2019 – with total buyer searches up 56% for the same period.
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BROKER RATING CHANGES
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BERENBERG RAISES CARNIVAL PLC TO 'HOLD' (SELL) - PRICE TARGET 800 PENCE
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LIBERUM REINITIATES RYANAIR WITH 'BUY' - PRICE TARGET 12.50 EUR
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COMPANIES - FTSE 100
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Sanofi and GlaxoSmithKline have reached an agreement, subject to final contract, with the UK government for the supply of up to 60 million doses of a Covid-19 vaccine. The vaccine candidate - developed by Paris-based pharmaceutical firm Sanofi in partnership with Brentford, England-based drugmaker GSK - is based on the recombinant protein-based technology used by Sanofi to produce an influenza vaccine, and GSK's pandemic adjuvant technology. Roger Connor, president of GSK Vaccines, said: "We believe that this adjuvanted vaccine candidate has the potential to play a significant role in overcoming the Covid-19 pandemic, both in the UK and around the world." Sanofi said it is leading the clinical development and registration of the Covid-19 vaccine and expects a phase 1/2 study to start in September, followed by a phase 3 study by the end of 2020. If the data are positive, regulatory approval could be achieved by the first half of 2021.
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Retailer Next said second quarter sales, while down on a year ago, were better than expected. Next reported a fall in full price sales for the second quarter, but said even this outcome was "much better" than expected. Full price sales tumbled 28% in the quarter, an improvement on the best case scenario given in its April trading statement. Online warehouse picking and despatch capacity is now back at normal levels and UK and Eire stores are now open, it said. Online sales in the second quarter were up 9% and like-for-like sales in Retail stores, since they re-opened, were down 32%. Next now estimates pretax profit to come in at GBP195 million for the full-year. "The duration of social distancing rules, post-lockdown consumer behaviour, earnings, unemployment, and, most importantly, whether there will be a second wave lockdown, all remain unknowable. Nonetheless, our experience over the last 13 weeks has given us much greater clarity on our Online capabilities during lockdown and the state of consumer demand, and we are now more optimistic about the outlook for the full year than we were at the height of the pandemic," said Next.
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Medical devices firm Smith & Nephew swung to an interim loss but said its performance improved as the second quarter progressed. Half year revenue was down 18% to USD2.04 billion - falling 30% to USD901 million in the second quarter - with the company swinging to an interim pretax loss of USD34 million from a profit of USD383 million a year ago. The trading profit margin, at 8.5%, was down significantly on 21.4% a year ago, as previously guided. The firm said performance improved across the second quarter as elective surgeries restarted, with underlying revenue declines of 47% in April, 27% in May, and 12% in June. Even though Smith & Nephew posted a loss for the half, it still declared an interim dividend of 14.4 cents per share, flat on a year ago.
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Housebuilder Taylor Wimpey also turned to a half-year loss amid Covid-19 disruption. Revenue for the first half of 2020 fell 56% to GBP754.6 million, with the firm swinging to an interim pretax loss of GBP39.8 million from a GBP299.8 million profit a year ago. The first half net private sales rate of 0.70 homes per outlet per week was down on 1.00 a year ago. The sales rate was 0.97 prior to the UK's Covid-19 shutdown, when it then reduced to 0.30. In the nine weeks since sales centres reopened in England, the sales rate has increased to 0.70. Taylor Wimpey said it expects to recommence dividend payments in 2021, with a 2020 final payout. It will "review the special dividend in 2021 for payment in 2022".
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COMPANIES - FTSE 250
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Aston Martin Lagonda Global Holdings reported a 64% fall in interim revenue, with its pretax loss deepening to GBP227.4 million from GBP80.0 million a year ago. "Obviously, it has been a challenging period with our dealers and factories closed due to Covid-19, in addition to aligning our sales with inventory with the associated impact on financial performance as we reposition for future success. However, I have been most impressed that through this most challenging of times we have been able to reduce our dealers' sports car inventory by 869 units," said Chair Lawrence Stroll. Trading remains challenging in many markets, the luxury car maker said, and the pace of emergence from lockdown and consumer recovery "varies significantly". This will impact the duration of the dealer de-stocking process for sports cars, currently expected to continue well into 2021.
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Thread maker Coats Group has poached its new chief financial officer from sausage casings maker Devro. Coates said Devro CFO Jackie Callaway will replace Simon Boddie when he retires in March 2021. Devro said it has started the process to find a replacement. Devro also reported flat half-year results, while saying it will pay last year's postponed final dividend in October.
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Wizz Air said shareholders at Tuesday's annual general meeting rejected the directors' remuneration report by 51.6% to 48.4%. Wizz said it will consult shareholders over the vote and publish an update within six months. The budget airline also said it swung to a EUR107.4 million loss in the first quarter of its financial year from a profit of EUR75.5 million a year before, amid Covid-19 flight groundings.
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COMPANIES - GLOBAL
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Deutsche Bank swung to profit in the first half of 2020, thanks to continued progress on cost reduction. The Frankfurt, Germany-based bank reported a swing to a pretax profit of EUR158 million in the three months to the end of June from a EUR946 million loss a year earlier. As a result the lender reported a profit of EUR364 million for the first half of 2020, compared to a EUR654 million loss a year prior. In 2019, Deutsche Bank took a EUR1.04 billion impairment to goodwill, which was not repeated in 2020. In addition, general & administrative expenses were reduced to EUR2.60 billion from EUR3.09 billion year-on-year. Net revenue, meanwhile, grew by 1% in the second quarter of 2020 to EUR6.29 billion. For the half-year, net revenue also increased by 1%to EUR12.64 billion. "In a challenging environment we grew revenue and continued to reduce costs, and we're fully on track to meet all our targets.This enabled us to more than offset higher provision for credit losses and remain profitable while supporting clients through difficult conditions," said Chief Executive Christian Sewing.
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Wednesday's Shareholder Meetings
Caspian Sunrise
Baron Oil
WANdisco
British Land Co
Water Intelligence
Walker Greenbank
Rose Petroleum
Urban Exposure
Aminex
Equals Group
Ferguson - GM re approval of additional listing in US
Caledonia Investments
Hibernia REIT
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
