LONDON (Alliance News) - UK banks are still counting the cost of their product mis-selling, with Lloyds Banking Group Monday adding a further GBP1.93 billion to the amount it has set aside to cover claims for previous sales of payment protection insurance and interest rate hedging products.
The new provisions bring the amount Lloyds has set aside for PPI in the last financial year to GBP3.05 billion, and comes just just one week after Royal Bank of Scotland said it was setting aside a further GBP465 million to cover PPI claims. Lloyds' overall provision for the PPI scandal now stands at GBP9.83 billion, while the figure is GBP3.1 billion at RBS.
Lloyds had expected PPI claims to start tailing off, but said the decline is slower than it expected.
The bank still expects to make a small pretax profit for 2013 and hopes to start paying a small dividend in the second half of the year, but there will be no payout for last year.
The stock is the biggest decliner on the FTSE100 Monday.
There was better news for shareholders elsewhere, as drinks can maker Rexam announced a shareholder return and BBA Aviation said it is mulling one.
Rexam said it intends to return about GBP450 million to shareholders through a redeemable B share scheme and a share consolidation, once it receives the USD805 million cash proceeds from the proposed sale of most of its healthcare packaging unit to private equity, a move that will leave it focused on drinks cans.
FTSE250-listed BBA Aviation, meanwhile, said it is considering returning some cash to shareholders after it completed the sale of its APPH operations for USD128 million in cash, a move that disposes of most of its manufacturing operations, leaving it focused on airport and airline services.
One of the biggest movers Monday morning is low-cost airline Ryanair Holdings PLC, which halted its recent run of profit warnings.
Europe's biggest low-cost airline kept its full-year profit guidance unchanged after it moved to cut costs and ramp up seat offers in response to the downturn that it had reported last autumn, and it raised its passenger number guidance thanks to the recent launch of new bases.
Ryanair reported its biggest third-quarter loss for five years, but saw its shares rise strongly after it reported that passenger numbers grew 6% in the quarter and said forward bookings in the current quarter are running well ahead of last year, albeit at lower yields, a better performance than it has reported in its last two trading updates.
In currency news, the pound is the worst performing G10 currency against the dollar at the beginning of the week, hitting an 11-day low, after UK manufacturing sector data came in worse than hoped.
The UK manufacturing sector expanded in January, but at a slower rate than had been expected, with the Markit Manufacturing PMI recording 56.7, down from 57.2 in December. Economists had expected a reading of 57.0.
Still, the new wasn't so bad for Chancellor George Osborne. While the PMI currently stands at its lowest level in three months, it is still well above the series average of 51.3. Companies scaled up output in response to stronger demand. There were reports of improved demand from the domestic market and rising levels of new business from overseas and the ongoing rebound in the sector led to further job creation at the start of the year, Markit said.
In Europe, the PMI data largely exceeded expectations and continued the trend of strong German growth supporting weaker but improving numbers elsewhere in the eurozone.
In political news, Syrian rebels are set to take part in the second round of peace talks between the Syrian government and the opposition in what should be the first direct participation by an armed group in the negotiations. Several leaders of the Free Syrian Army will participate in the talks, scheduled to start February 10, said the opposition Syrian National Coalition, which participated in the first round.
Officials in the Higher Revolutionary Military Council, the FSA's governing body, said officers are currently forming a shortlist of six rebel officials to accompany the coalition to Geneva next week.
Ukraine's President Viktor Yanukovych, who was hospitalized as tensions escalated between his government and the opposition, is expected to return to work Monday. The presidency confirmed his release from hospital Sunday, four days after he was admitted with acute respiratory problems.
"After concluding the necessary treatment, the president feels well - his physical condition is satisfactory," Yanukovych's office said. Opposition groups have for weeks been staging violent protests in the capital Kiev and other parts of the country, demanding the president's resignation and early elections.
The development came as EU foreign policy chief, Catherine Ashton, said that the EU and the US are working on an aid package for the country, aimed at helping the country into a transitional phase, the Wall Street Journal reported.
Anti-government protesters have retreated from two of the key Bangkok intersections they have occupied since January 13 as part of their effort to paralyze the government, but vowed to keep their demonstration going. Protest leader Suthep Thaugsuban said the regrouping was necessary to protect demonstrators from expected attacks by the caretaker government of Prime Minister Yingluck Shinawatra.
Thailand's Election Commission postponed its announcement of the country's election results on Sunday after voting was disrupted in more than 10% of polling stations across the country. Polling was successfully held in only 89.2% of the country's 93,952 polling stations due to protesters blocking voting, a lack of ballots and insufficient election officers. A new poll is scheduled for February 23 to allow the 440,000 voters affected by the protests to cast their ballots.
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FTSE 100: up 0.3% at 6,529.27
FTSE 250: up 0.1% at 15,691.07
AIM ALL-SHARE: up 0.2% at 859.22
GBP-USD: 1.6337
EUR-USD: 1.3490
GOLD: USD1,245.60 an ounce
OIL (Brent): USD105.96 a barrel
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KEY UK CORPORATE NEWS:
FTSE 100: Smith & Nephew is set to acquire medical devices company ArthroCare Corp for USD1.7 billion. The firm will pay USD48.25 per share for the Texas-based firm, which it said is a 20% premium over ArthroCare's 90-day volume-weighted average share price. The medical technology company said that ArthroCare's products would compliment and strengthen its sports medicine business. Randgold Resources said it achieved record production in 2013, but pretax profit fell because of the lower gold price. Royal Bank of Scotland Group Chief Executive Ross McEwan is set for a meeting with the Bank of England over the bank's capital position, the Sunday Telegraph reported. GlaxoSmithKline is expected to announce plans this week to launch late stage clinical trials on ten new drugs over the next two years, the Daily Telegraph reported, without saying where it got the information. The list will include medicines in Glaxo?s key areas of cancer and respiratory disease, the newspaper said. The news came as the firm said it had received Breakthrough Therapy designation for its bone marrow disorder treatment Promacta/Revolade from the US Food and Drug Administration.
FTSE 250: Mitie Group said it has it experienced "good" organic growth since the start of October last year, driven by new and expanded contracts. The company said it expects losses from the closure of its cyclical mechanical and electrical engineering contracting businesses to cost more in the second-half than in the first, reversing its previous guidance that these losses would ease. The outsourcing company said it is continuing its move to target higher growth and profit margin businesses, as it turns its long-term strategy towards growing its core markets of facilities and property management.
AIM: Shares in Ormonde Mining are up after it received formal environment impact clearance for its Barruecopardo tungsten project in Spain. Energy Technique is another gainer after its nine month pretax profit was up nearly five-fold, ahead of management expectations. Nostra Terra Oil & Gas is up after it entered into a USD25 million credit facility with Texas Capital Bank in order to fund growth without diluting its shares, while it also said it expected to have its largest working interest yet at a new well in the Chisholm Trail Prospect. Shares in Alexander Mining have been lifted after it signed a major commercial licence, financing and consultancy agreement with hedge fund Ebullio Group. It will receive GBP2.5 million in cash royalties as it licenses its AmmLeach technology to Ebullio for use in developing a large mining portfolio in Turkey. Oxford Advanced Surface is also up after it entered a project with Sun Chemical Ltd, supported by a grant of GBP179,000 from the UK's innovation agency, the Technology Strategy Board. The two companies will work on creating a novel radiation curable coating platform than they hope will differentiate to ink-jet inks for packaging. Hummingbird Resources is another gainer after it received further positive results from its infill drilling programme at its Tuzon deposit and said it will start further drilling at the Dugbe F Resource imminently. Iofina is up after the Department of Natural Resources and Conservation in the US state of Montana gave positive feedback on the company's water rights application. Blinkx is another riser after agreeing a partnership with Crown Media Family Networks, which owns the Hallmark Channel and Hallmark Movie Channel, to provide targeted advertising using Crown Media's original content. Blinkx will use its AdHoc platform to place relevant advertising against Crown Media's content, with resulting revenue shared between the two companies. At the other end of the market, shares in Rurelec have dropped after the Permanent Court of Arbitration in The Hague awarded it much less than hoped for under the company's Bolivian compensation claim. The court granted immediate compensation of USD35.5 million to Rurelec, higher than the GBP20.6 million paid to acquire its controlling stake in Guaracachi in 2006, with a further USD5.5 million due to be paid back to Rurelec by Guaracachi itself. But the figure was well below a USD142.3 million estimate by the company's valuation experts and the USD75 million that Chief Executive Peter Ear has often mentioned. Shares in Scotgold Resources are also down after it said it is evaluating its options for a smaller project at the Cononish Gold and Silver Project in Scotland because of the continued global economic uncertainty and volatile metal prices means getting funding for mining projects remains difficult.
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AFTERNOON WATCHLIST: US Markit Manufacturing PMI, US Construction Spending, US ISM Manufacturing PMI, US Total Vehicle Sales
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Tuesday's Key UK Corporate Events
Alumasc Group Interim Results
BG Group Full Year Results
Delphi Automotive Q4 Results
Low and Bonar Preliminary Results
Victrex Interim Management Statement
BP Q4 Results
Arm Holdings Q4 and FY 2013 results
Electrocomponents Interim Management Statement
St. Modwen Full Year Results
TalkTalk Telecom Group Interim Management Statement
Ocado Preliminary Results
UDG Healthcare Interim Management Statement
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Tuesday's Key Economic Events
All Day China Chinese New Year
09:30 UK PMI Construction
10:00 EU Producer Price Index
13:30 US Fed's Lacker speech
13:55 US Redbook index
14:45 US ISM New York index
15:00 US Factory Orders
15:00 US IBD/TIPP Economic Optimism
17:30 US Fed's Evans Speech
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By Alice Attwood; aliceattwood@alliancenews.com; @AliceAtAlliance
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