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LONDON (Alliance News) - Lloyds Banking Group kicked off the first-quarter bank earnings season Thursday, reporting that its pretax profit dropped by a third to GBP1.37 billion after last year was buoyed by gains on the sale of government securities.

However, its underlying profit increased to GBP1.80 billion, from GBP1.48 billion a year earlier, with its total net interest income - the amount it earns from interest-bearing assets minus the cost of servicing loans, mortgages and investments - up to GBP2.72 billion, from GBP457.0 million. It raised its forecast for its full-year net interest margin.

Crucially, the bank didn't add any more to its provision for repaying mis-sold payment protection insurance, although the bank's Finance Director George Culmer refused to rule out further provisions in the future. It also said it hopes to float the TSB bank it span off last year by the end of June, and reiterated that it expects to apply to regulators in the second-half of this year to restart dividend payments.

Pharmaceutical company Shire raised its guidance for earnings per share in 2014, reflecting the contribution from the recently completed acquisition of ViroPharma Inc.

Shire posted a pretax profit of USD304.3 million in the first quarter of 2014, down from USD352.0 million a year earlier, as higher operating expenses offset a rise in revenue to USD1.31 billion, from USD1.10 billion. Its product sales grew 19% in the first quarter, or 11% excluding ViroPharma products. The company is spending on its pipeline and acquisitions, pushing up costs, but said it now expects the increase this year to be lower than it previously expected.

Rolls-Royce Holdings still expects to post flat revenue and profit in 2014, excluding a hit from exchange rate movements and a charge for its marine division, even though it has now also cut its profit guidance for that unit.

The aircraft and marine engine makes said it now expects profit and revenue in its marine unit to fall 10% compared with 2013 due to a one-off charge estimated at GBP30 million to rectify a "product quality issue" and due to lower services volumes. It had previously predicted lower revenue, but modest profit growth at the unit.

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FTSE 100: up 0.3% at 6,801.85
FTSE 250: up 0.03% at 15,821.20
AIM ALL-SHARE: up 0.2% at 824.50
GBP-USD: up at 1.6884
EUR-USD: up at 1.3876
GOLD: down at USD1,280.90 an ounce
OIL (Brent): down at USD106.97 a barrel
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Key UK Corporate News
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FTSE 100: BG Group reported lower first-quarter profit as the situation in Egypt continued to weigh, and it reaffirmed that production in 2014 as a whole is likely to be at the lower end of its guidance due to the issues in the country and the hit is likely to continue into 2015. British Sky Broadcasting said that it is on track to deliver on its expectations for the full year, as it saw revenue rise in the nine months to end-March, although operating profit continued to be hit by higher investments and football broadcasting costs. ARM Holdings Chief Financial Officer Tim Score has decided to retire. The company said it will appoint consultants to look for a successor. The Weir Group retained its full-year guidance as trading since the beginning of 2014 has been in line with management expectations. It still expects good constant currency revenue and profit growth, with margins broadly in line with 2013 levels, although reported results will be hit by adverse currency movements. Its shares fell after a recent strong run, as investors reacted to the lack of an upgrade. Barclays has appointed Michael Harte from the Commonwealth Bank of Australia as its new chief operations and technology officer, replacing Shaygan Kheradpir, who resigned in November in order to become the chief executive of Juniper Networks Inc. Schroders reported an increase in first-quarter pretax profit as it saw GBP3.8 billion in net inflows boosting assets under management. Smith & Nephew reiterated confidence in its 2014 outlook and detailed its new restructuring programme, as its pretax profit benefited from a one-off gain in the quarter to March 29, although revenue remained broadly flat.

FTSE 250: James Fisher & Sons said revenue in the first quarter was "strongly ahead" of the same period a year earlier, with good demand for its offshore services across international markets and in the North Sea. RPC Group will buy Hong Kong-based injection moulded components and tools maker ACE Corporation Holdings for up to USD430 million, an acquisition it has been working on for three years. It will fund the initial payment by issuing ACE's shareholders with about 8.5 million new RPC shares, raising about GBP75 million in a share placing, with the rest coming from a new revolving credit facility. RPC also expects its overall trading performance for the financial year that ended March 31 to be in line with management expectations, after revenue in the fourth quarter rose compared with the previous year. Howden Joinery Group said that its performance since the beginning of the year has been in line with its expectations as improved market conditions seen since last summer have continued. The company also confirmed plans to open 30 new depots during 2014, having already opened six new sites since the beginning of the year. N Brown Group reported higher pretax profit for its last financial year, driven by double-digit growth in sales of menswear and home products, and it forecast a bigger surge in sales growth from 2016 as it invests in revitalising and expanding its businesses. Lancashire Holdings reported lower first-quarter pretax profit. Net revenue rose after an increase in net premiums earned, but expenses were up. Chief Financial Officer Elaine Whelan said the company is likely to return a "substantial" amount of earnings to shareholders later in the year. Savills has agreed to acquire Studley Inc, a US commercial real estate services firm specialising in rental tenant representation, in a deal worth USD260 million in cash, promissory notes and Savills shares. RPS Group said it continued to grow "well" in the early part of 2014, supported by acquisitions made in 2013, adding that cash conversion in the first part of the year was ahead of budget. Greene King has agreed to sell 275 of its UK-based non-core tenanted and leased pubs to Hawthorn Leisure Ltd in a deal worth GBP75.6 million. Millennium & Copthorne Hotels reported lower first quarter revenue and profit as the strength of the pound reduced its overseas earnings, but revenue was up at constant exchange rates as overall occupancy and room rates rose, helped by a recovery in its Asian hotels. Synthomer reiterated confidence in its medium- and long-term outlook and said it was continuing to review its dividend policy to potentially increase returns to shareholders. Phoenix Group Holdings said its first-quarter cash generation decreased but said it is on course to meet its full-year cash target. Go-Ahead Group retained its expectations for the full-year, saying it is pleased with the overall performance of its bus and rail business and remains focused on cutting costs and improving revenue growth.

AIM All-Share: Mobile Streams is up by more than a third after it said that it returned to profitability in February and March on an earnings before interest, tax, depreciation and amortisation basis after a loss in January, although it made a loss in its third quarter to end-March overall. The company was hit by the sudden devaluation of the Argentine peso against sterling in January. Savannah Resources is doing well after it paused drawing down funds from its facility with the Bergen Global Opportunity Fund LP for 30 days due to the general share market conditions for junior resources companies. Leni Gas & Oil is another gainer after its first development well at its Goudron field in Trinidad struck oil. The firm only started drilling the well this week. Ariana Resources is up after it discovered additional gold-silver bearing zones within the Kiziltepe Sector of the Red Rabbit Mining Project. Scancell Holdings is up after it appointed long-time consultant Dr Sally Adams to its board as development director with immediate effect. Premier African Minerals jumped after it recorded a significant increase in tungsten at the RHA Tungsten project in Zimbabwe. Stellar Resources is a big faller after it said the gold treatment plant it purchased for the Clogau Gold Mine has been shipped, but the director of the Wales operations said gold production will be "limited" in the early stages.
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Top Economics And General
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The UK manufacturing sector expanded at the fastest pace in five months during April, led by faster growth in output and new orders, survey data from Markit Economics showed. The seasonally adjusted Markit/Chartered Institute of Purchasing & Supply Purchasing Manager's Index climbed to 57.3 in April from 55.8 in March, which was revised from 55.3. Economists had forecast a score of 55.4. Factory output growth hit an eight-month high with gains across the consumer, intermediate and investment goods sectors. New order growth climbed to its highest in three months, led by improved demand from both domestic and export markets.
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UK house prices recorded a faster-than-expected double-digit growth in April, survey data showed. House prices increased 10.9% year-on-year in April, faster than the 9.5% rise seen in March, mortgage lender Nationwide reported. The rate was forecast to rise to 9.8%. Month-on-month, house price growth more than doubled to 1.2% from 0.5%.
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British mortgage approvals for house purchases declined more-than-expected in March to its lowest level in six months, figures from the Bank of England showed. Falling for a second straight month, home loan approvals totalled 67,135 in March. In February, approvals were 69,592, easing from January's 74-month high. Economists had forecast the figure to fall to 72,000 from February's original 76,753.
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China's monthly index of manufacturing activity edged up to 50.4% in April, officials said Thursday, 0.1% above the March figure. It was the second consecutive rise in the widely watched purchasing managers' index, released by the National Bureau of Statistics and the China Federation of Logistics and Purchasing. The index began to climb in March after hitting an eight-month low of 50.2 in February, a drop from January's 50.5.
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The Federal Reserve is continuing to pare back its infusion of cash into the US economy, even after the government reported Wednesday that growth screeched to a halt in the first quarter of 2014. Gross domestic product in the US grew at an annualized rate of 0.1% in the January-March period, according to an initial estimate by the Commerce Department's Bureau of Economic Analysis. The slowdown was attributed to the unusually severe winter in the eastern US and to slowdowns in business investment, exports and inventory growth. After meeting in Washington, hours after the GDP report, the Fed said it would cut its monthly purchases of government-linked bonds by another 10 billion dollars to 45 billion dollars in May. "There is sufficient underlying strength in the broader economy to support ongoing improvement in labour market conditions," the Fed said.
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More than 100,000 people took part in a march on Moscow's Red Square to mark Labour Day, the first such event on the doorsteps of the Kremlin since the collapse of the Soviet Union 23 years ago. Patriotic fervor was high. Some protesters held Soviet and Russian flags, others raised banners backing President Vladimir Putin's decision to annex the Crimean Peninsula from Ukraine last month. "Crimea belongs to Russia forever," read one banner.
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The International Monetary Fund approved a USD17.01 billion economic package for Ukraine to restore macroeconomic stability amid heightened tensions in the region. The Washington-based lender will make USD3.2 billion immediate payment to Ukraine. In exchange for the loan, Ukraine is committed to maintain flexible exchange rate, and meet near-term fiscal obligations. The IMF loan will also unlock another USD15 billion funds, including loans and other funding from the US, Europe and the World Bank.
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Afternoon Watchlist (all times British Summer Time)

14:45 US Markit Manufacturing PMI
15:00 US Construction Spending
15:00 US ISM Manufacturing PMI
15:30 US EIA Natural Gas Storage change
21:00 US Total Vehicle Sales

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Friday's Key UK Corporate Events

Rentokil Trading update
Royal Bank of Scotland Group Interim Management Statement
Direct Line Insurance Group Interim Management Statement
Rexam Interim Management Statement
Schroder Real Estate Investment Trust Interim Management Statement
Capital & Counties Properties Interim Management Statement
Laird Interim Management Statement
InterContinental Hotels Group Interim Management Statement

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Friday's Key Economic Events (all times British Summer Time)

00:30 Japan Unemployment Rate
08:45 Italy Markit Manufacturing PMI
08:50 France Markit Manufacturing PMI
08:55 Germany Markit Manufacturing PMI
09:00 EU Markit Manufacturing PMI
09:30 UK PMI Construction
10:00 EU Unemployment Rate
n/a EU European Commission Economic Growth Forecasts
13:30 US Nonfarm Payrolls
13:30 US Unemployment Rate
14:45 US ISM New York index
15:00 US Factory Orders

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By Steve McGrath; steve.mcgrath@alliancenews.com; @stevemcgrath1

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