(Alliance News) - The Bank of England on Tuesday removed restrictions on UK commercial banks paying dividends, saying they are "well capitalised and able to withstand headwinds to capital".
The decision was unveiled in the central bank's Financial Stability Report, which sets out the view of the BoE Financial Policy Committee on the stability of the UK financial system.
"The economic outlook has improved, but risks to the recovery remain, especially those related to the spread of Covid," the report said.
"Households and businesses will need continued support from the UK financial system as the economy recovers and the government’s exceptional support measures unwind over the coming months," it said. "Banks have the capital and liquidity to be able to support the economy."
The BoE added: "Major UK banks and building societies have been resilient to the challenges posed by Covid and their capital and liquidity positions remain strong."
The report concluded: "The [Prudential Regulation Authority] has therefore concluded that the extraordinary guardrails within which bank boards were asked to determine the appropriate level of distributions in relation to full-year 2020 results are no longer necessary and have been removed," the BoE said. "The FPC supports this decision and judges it to be consistent with the interim results of the 2021 [solvency stress test] as well as the central outlook."
UK bank shares responded positively to the news early Tuesday. HSBC was up 1.6%, Barclays up 1.2%, Lloyds up 1.4%, and NatWest up 2.0%.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.3% at 7,144.54
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Hang Seng: up 1.6% at 27,955.22
Nikkei 225: closed up 0.5% at 28,718.24
DJIA: closed up 126.02 points, or 0.4%, at 34,996.18
S&P 500: closed up 15.08 points, or 0.4%, at 4,384.63
Nasdaq Composite: closed up 31.32 points, or 0.2%, at 14,733.24
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EUR: flat at USD1.1864 (USD1.1861)
GBP: flat at USD1.3887 (USD1.3881)
USD: flat at JPY110.38 (JPY110.33)
Gold: up at USD1,812.21 per ounce (USD1,803.57)
Oil (Brent): up at USD75.50 a barrel (USD75.00)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday's Key Economic Events still to come
Germany balance of payments
1000 CEST France IEA oil market report
0600 EDT US NFIB index of small business optimism
0745 EDT US Goldman Sachs weekly chain store sales index
0830 EDT US real earnings
0830 EDT US consumer price index
0855 EDT US Johnson Redbook retail sales index
1400 EDT US monthly Treasury statement of receipts & outlays of US government
1630 EDT US API weekly statistical bulletin
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Italy, Germany and Poland are among the destinations most likely to be added to the UK government's green travel list, according to an analyst. Robert Boyle, former director of strategy at British Airways-parent IAG, predicted that 12 countries could be put in the low-risk tier this week. He wrote on his website www.gridpoint.consulting that this includes nine European countries which are all "strong candidates", consisting of Austria, Bulgaria, Germany, Italy, Latvia, Lithuania, Poland, Slovakia and Switzerland. The UK government's travel lists are expected to be updated on Thursday. People arriving in the UK from green list destinations are not required to self-isolate. Those travelling from an amber location must self-isolate at home for 10 days, although that requirement will be lifted on Monday for people arriving in England who have received both doses of a coronavirus vaccine in the UK, or are under 18 years old.
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The inflation rate in Germany slowed slightly in June as the surge in energy prices slowed, figures from the Federal Statistics Office showed. The inflation rate in Germany, measured as the year-on-year change in the consumer price index, stood at 2.3% in June. Following a continuous rise reported since the beginning of 2021, the inflation rate has slightly slowed in June after standing at 2.5% in May. Destatis said consumer prices were up 0.4% in June month-on-month. Energy product prices rose 9.4% compared with a year earlier, considerably higher than the overall inflation rate, after rising by 10% in May.
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BROKER RATING CHANGES
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BARCLAYS RAISES SHELL A AND B TO 'OVERWEIGHT' (EQUAL WEIGHT) - PRICE TARGET 1,950 (1,700) PENCE
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GOLDMAN SACHS RAISES DR MARTENS TO 'BUY' (NEUTRAL) - PRICE TARGET 535 (490) PENCE
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BARCLAYS RAISES ENQUEST TO 'OVERWEIGHT' (EQUAL WEIGHT) - TARGET 33 (19) PENCE
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COMPANIES - FTSE 100
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Property investor British Land posted what it called a strong operational performance for the quarter that ended June 24, with 183,000 square feet campus lettings. Across the company's Retail portfolio, footfall and sales reached 86% and 94% of pre-pandemic levels in the seven weeks since the reopening of indoor hospitality on May 17. British Land also noted that 85% of June rent - totalling GBP87 million - was collected to date. This compares to 72% of the total amount collected at the same point following the December quarter-end and 76% following the March quarter-end. "With lockdown restrictions lifting, we have seen a notable improvement in activity across our markets and our business is performing well," said Chief Executive Simon Carter.
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Phoenix Group has agreed to sell Ark Life Assurance to Irish Life Group for EUR230 million in cash. The completion of this transaction is expected by early 2022. The insurer said the disposal simplifies its European operations and accelerates the cash release from this business. The company expects to redeploy the capital into higher return growth opportunities "to drive incremental future cash generation".
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COMPANIES - FTSE 250
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Howden Joinery Group reported a strong first half performance, ahead of its expectations, with revenue of almost GBP785 million versus GBP465.0 million a year ago. Going forward, the supplier of kitchens said this pattern of trade has continued since the end of the first half of 2021, and it remains "cautiously optimistic" in its outlook for the second half. Howden Joinery said it is currently expecting pretax profit of around GBP300 million for 2021 as a whole, up from GBP185.3 million posted for 2020.
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HgCapital Trust said enterprise software provider insightsoftware has secured an investment from Hg, a software and services investor. The Hg Saturn 2 Fund will make a USD1 billion equity investment in insightsoftware to become a significant minority shareholder alongside TA Associates, in a transaction valuing the business at around USD4 billion. As part of the transaction, insightsoftware will continue to be supported by minority shareholders Genstar and ST6.
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Mobility solutions platform Redde Northgate completed the acquisition of Charged Electric Vehicles, a supplier of electric vehicle charging equipment across the UK. This acquisition provides Redde with a platform to expand its EV offerings. No financial details of the purchase were disclosed, though Redde Northgate said it was strategically significant for reaching its environmental goals.
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COMPANIES - MAIN MARKET AND AIM
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Healthcare software firm Emis Group said trading for the half year to June 30 has been slightly ahead of expectations, with a return to business "as usual" despite the continuing challenges of the pandemic. "Healthcare continues to be at the centre of the global agenda and, as the UK recovers from the pandemic, we are well positioned to meet the evolving requirements of the sector, both today and in the future. We remain confident in the outlook," said Chief Executive Andy Thorburn.
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Gamma Communications also said it has continued to perform well through the first six months of 2021. Growth in the first half has been in line with the market expectations for the full year. This is despite the first-half performance hurt by lockdowns in all of the company's territories which restricted sales activities for both Gamma and its partners. During the period, Gamma said it launched a number of key products in the UK, including Phone Line +, a replacement service for customers who currently use basic telephone services, and Horizon Contact, a cloud contact centre solution.
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COMPANIES - GLOBAL
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German carmaker Volkswagen is due to present a new group strategy on Tuesday, amid expectations that its 'New Auto' concept will sharpen the company's focus on the key issues of digitalization and services. Europe's largest automotive group has already planned investments worth double-digit billion figures to expand its range of electric and hybrid models, as well as developing its own battery cell production. The industry is also increasingly focusing on software to network vehicles and the development of new mobility-related services. The overall orientation, aimed at shaping Germany's largest corporation until 2030, is the brainchild of group chief executive Herbert Diess. His contract, ending in early 2023, was recently replaced with a new one set to run until October 2025.
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Tuesday's Shareholder Meetings
British Land Co PLC - AGM
LondonMetric Property PLC - AGM
Vianet Group PLC - AGM
Mode Global Holdings PLC - AGM
Gresham House Renewable Energy VCT 1 and 2 - GM re proposed wind-down
Evgen Pharma PLC - AGM
BWA Group PLC - AGM
Iconic Labs PLC - GM
UP Global Sourcing Holdings PLC - GM re fundraise
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By Tom Waite; thomaslwaite@alliancenews.com
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