(Alliance News) - Stock prices in London are seen opening lower on Monday after the market's second biggest stock, HSBC, reported a big drop in third-quarter profit, prompting a new business plan.
In other early company news, iron pellet producer Ferrexpo's chief executive has stood down temporarily amid allegations of misconduct in Ukraine. Photo booth and laundry operator Photo-Me International said trading was in line with expectations.
IG futures indicate the FTSE 100 index is to open 7.17 points lower at 7,317.30. The blue-chip index closed down 3.78 points, or 0.1% at 7,324.47 on Friday.
"HSBC missed analyst estimates in the third quarter and announced significant restructuring charges as part of its struggle with weakening global outlook. FTSE futures slipped following the HSBC's miss, hinting at a soft start in London," said London Capital Group's Ipek Ozkardeskaya.
The Asia-focused bank is London's second largest company by market capitalisation behind oil major Royal Dutch Shell.
HSBC Holdings held its dividend Monday despite third-quarter profit and revenue suffering amid "challenging" conditions, in particular within its European and US businesses. For the third quarter, HSBC held its dividend unchanged at 10 US cents per share.
For the three months ended September, pretax profit narrowed 18% to USD4.84 billion from USD5.92 billion the year prior. Company-compiled analyst consensus expected the figure to come in at USD5.3 billion.
Third quarter operating income fell 3.2% to USD13.36 billion from USD13.80 billion the year before.
"Our previous plans are no longer sufficient to improve performance for these businesses, given the softer outlook for revenue growth," Chief Executive Officer Noel Quinn said. "We are therefore accelerating plans to remodel them, and move capital into higher growth and return opportunities."
Amid these "softer" conditions, HSBC now no longer expects return on equity of at least 11% to be achieved in 2020. The FTSE 100-listed bank will, therefore, focus on rebalancing its capital away from low-return businesses as well as adjust its cost base.
These changes could result in "significant" charges in the fourth quarter of 2019. Such costs would be related to goodwill impairments and additional restructuring charges.
HSBC shares were down 2.8% in Hong Kong.
Ferrexpo said Chief Executive Officer Kostyantin Zhevago will step down temporarily to focus on resolving matters in Ukraine relating to one of the businesses he owned until 2015.
Chief Financial Officer Chris Mawe has been appointed as acting chief executive. Zhevago will remain on the board as a non-independent, non-executive director, Ferrexpo added.
Earlier this month, Bloomberg reported Ukraine had added Zhevago to an international wanted list after he failed to report for questioning about former business commitments. He was named as a suspect in absentia, Bloomberg reported.
According to Bloomberg, Ukrainian investigators believe he has committed "large-scale" money laundering and embezzlement.
Zhevago "strongly denies any allegations of wrongdoing", the company had said in response.
Ferrexpo Chair Steve Lucus said on Monday: "The board, including Mr Zhevago, believes that this temporary change of leadership is necessary and in the interests of all shareholders to enable Mr Zhevago to focus on on-going matters in Ukraine without impacting the company's operations. Mr Zhevago continues to have the full support of the board."
Martin Sorrell's S4 Capital said its programmatic media practice MightyHive has merged with two companies to "build on its existing analytics capabilities". MightyHive has combined with London-based ConversionWorks and South Korea-based data and analytics firm Datalicious Korea.
S4 Capital provided no financial details of the MightyHive's three-way merger.
Photo-Me International said it has continued to make strategic and operational progress, driven by the expansion of its Laundry unit and the acquisition of French juice equipment firm Sempa back in April.
In the period to September 30, trading has been in line with expectations, supported by growth in Continental Europe and Asia, despite trading in the Identification division in the UK remaining challenging.
The company said total reported Identification revenue in the period to September 30 declined by 3.8%, reflecting "the decrease in activity in the UK photobooth market".
Photo-Me said the expansion of Laundry operations remains a key driver of growth and has made further progress during the period, with revenue growth of 23%.
"While consumer uncertainty continues to weigh on our business in the UK, we remain confident that overall the group will continue to perform well, and in line with market expectations in the current financial year," Photo-Me said.
Elsewhere, Goldman Sachs cut business publisher and events firm Informa to Sell from Neutral, and RBC Capital started coverage on bookmaker Flutter Entertainment at Outperform.
The pound was quoted at USD1.2822 early Monday, slightly lower than USD1.2831 at the London equities close Friday.
UK Prime Minister Boris Johnson will likely fail to secure "super majority" support for a December general election - but knows he will require 100 fewer MPs to grant the same request just 24 hours later.
The prime minister's election bid on Monday, to be made under the Fixed-Term Parliaments Act, would require a two-thirds Commons majority - 434 MPs - to agree to an election on December 12.
Labour's lack of support for the proposal means it is likely to be defeated when voted upon on Monday evening. But the Liberal Democrats and Scottish National Party have offered Johnson a way out of the deadlock.
Johnson has already had two requests for an election refused. Lib Dem leader Jo Swinson and the SNP's Westminster leader Ian Blackford have put forward a tightly-drafted Bill that would grant an election on December 9 - three days earlier than the PM's suggested polling date - as long as the EU grant an extension until January 31.
With the SNP and Lib Dems supporting the initiative, the Bill is likely to pass even without Labour backing.
The Japanese Nikkei 225 index closed up 0.3%. In China, the Shanghai Composite closed up 0.9%, while the Hang Seng index in Hong Kong is up 0.7%.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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