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LONDON BRIEFING: Barclays buys UK mortgage lender for GBP2.3 billion

Fri, 24th Jun 2022 08:20

(Alliance News) - Barclays on Friday said it is buying specialist mortgage lender Kensington Mortgage to take a bigger share of the UK housing market.

The deal is worth around GBP2.3 billion, Barclays said. It requires UK regulatory approval and is expected to complete at the end of the fourth quarter or in first quarter of 2023.

"The acquisition will enable Barclays to broaden its product offering and capabilities in the UK mortgage market, extend the number of customers we can serve and grow mortgage originations to better utilise our strong UK funding base," Barclays said.

London-based bank Barclays is buying Kensington Mortgage from companies controlled by funds managed by private equity firms Blackstone Tactical Opportunities Advisors and Sixth Street Partners,.

Kensington Mortgage had a pretax profit of GBP500,000 and income of GBP65.9 million in its financial year 2021, Barclays said. The lender had GBP66.7 million of gross assets as at March 31, 2021, Barclays said.

Kensington Mortgage's mortgage portfolio stood at GBP1.2 billion as at May 31, split 70% for owner-occupied properties and 30% in buy-to-let residential mortgages.

"KMC is a best-in-class specialist mortgage lender with an established track record in the UK market, strong broker and customer relationships and data analytics capabilities. KMC complements our existing UK mortgage business and broker relationships through the addition of a specialist prime mortgage originator and the utilisation of our strong UK funding base," said Matt Hammerstein, chief executive officer of Barclays Bank UK.

"The transaction should generate attractive returns for Barclays over the medium term as the KMC mortgage portfolio increases in size through the ongoing origination of new mortgages.

Barclays shares were down 0.4% early Friday.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: up 0.4% at 7,050.28

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Hang Seng: up 2.0% at 21,695.18

Nikkei 225: closed up 1.2% at 26,491.97

S&P/ASX 200: closed up 0.8% at 6,578.70

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DJIA: closed up 194.23 points, 0.6%, at 30,677.36

S&P 500: closed up 1.0% at 3,795.73

Nasdaq Composite: closed up 1.6% at 11,232.19

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EUR: down at USD1.0439 (USD1.0517)

GBP: unchanged at USD1.2260

USD: up at JPY134.80 (JPY134.56)

Gold: down at USD1,823.55 per ounce (USD1,837.04)

Oil (Brent): down at USD110.22 a barrel (USD111.15)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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Friday's key economic events still to come

1000 CEST Germany Ifo business climate index

1430 CEST UK BoE Chief Economist Huw Pill speaks at conference

1000 EDT US new residential sales

1000 EDT US University of Michigan survey of consumers

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UK consumer confidence has fallen to its lowest level since records began in 1974 as a "stark new economic reality" hits households, figures show. GfK's long-running consumer confidence index dropped one point to minus 41 in June, setting a new record low for a second successive month. Confidence in personal finances over the next 12 months fell three points to minus 28 – 39 points lower than this time last year. Expectations for the general economic situation over the coming year also dropped, by one point to minus 57 – 55 points lower than last June. Joe Staton, from GfK, said: "The consumer mood is currently darker than in the early stages of the Covid pandemic, at the result of the 2016 Brexit referendum, and even the shock of the 2008 global financial crisis, and now there's talk of a looming recession."

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UK Prime Minister Boris Johnson said he will "keep going" after his authority was dealt a series of blows by a double by-election defeat which triggered the resignation of a Cabinet minister. Johnson acknowledged on Friday that losing the former Tory stronghold of Tiverton and Honiton to the Lib Dems as well as surrendering Wakefield to Labour was "tough", but he insisted he was pushing on, and vowed to "listen" to voters. Conservative Party Co-Chair Oliver Dowden quit, saying he and Tory supporters are "distressed and disappointed by recent events", telling Johnson that "someone must take responsibility". Johnson, speaking to broadcasters 4,000 miles away in Rwanda, where he is at a Commonwealth summit, thanked Dowden for his "excellent" service in the role. The prime minister said he would take responsibility, but stressed the cost-of-living crisis was the most important thing for voters, saying it is "true that in mid-term governments post-war lose by-elections".

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EU leaders granted candidate status to Ukraine and Moldova in a strong show of support against Russia's invasion, as the US said it was sending Kyiv more high-precision rocket systems. The West's latest attempts to rally behind Ukraine came as Russia closed in on key cities in the country's embattled east and prompted growing global concerns with restrictions in gas and grain exports. Ukraine's President Volodymyr Zelensky hailed the EU decision on his country and Moldova as "a unique and historic moment", although the two former Soviet republics face a long path before joining the bloc and its benefits of free movement and a common market. "Ukraine's future is within the EU," said Zelensky, who had been working the phones for weeks.

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BROKER RATING CHANGES

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Goldman Sachs raises Beazley price target to 605 (580) pence - 'buy'

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Citigroup cuts Asos price target to 1000 (1500) pence - 'neutral'

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Deutsche Bank cuts Ryanair price target to 15.30 (17.00) EUR - 'buy'

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COMPANIES - FTSE 100

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GSK and Sanofi reported positive results against the Omicron variant of Covid-19 from their vaccine in a placebo-controlled trial. The trial evaluated an adjuvanted bivalent D614 and Beta vaccine candidate. It demonstrated an efficacy of 64.7% against symptomatic Covid-19 and 72% efficacy in Omicron-confirmed symptomatic cases. "Sanofi-GSK's vaccine is the first candidate to demonstrate efficacy in a placebo-controlled trial in an environment of high Omicron variant circulation," the companies noted. "Our vaccine candidate has the potential to make an important contribution to public health as the pandemic evolves further. We are looking forward to the discussions with regulatory authorities with the aim of making our vaccine candidate available later this year," said Roger Connor, president of GSK Vaccines.

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British Airways workers based at Heathrow on Thursday voted to strike in a dispute over pay. Members of the GMB and Unite backed industrial action. The unions said holidaymakers face disruption, warning of a summer of strikes. Workers, including check-in staff, will now decide on strike dates, which the union said were likely to be held during the peak summer holiday period. Downing Street said strike action would add to passengers' "misery" at airports and called for BA to put contingency measures in place. A No 10 spokesman said: "This is obviously a matter for British Airways and the unions and we would strongly encourage both to come together to find a settlement. BA is owned by International Consolidated Airlines Group.

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COMPANIES - FTSE 250

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The takeover of defence contractor Ultra Electronics by Cobham moved a step further to completion. The UK government on Thursday said it was "minded to accept" remedies to address national security concerns raised by the GBP2.6 billion acquisition of the FTSE 250 defence specialist by former London-listing Cobham. Kwasi Kwarteng, UK business secretary, on Thursday launched a consultation into the undertakings offered by Cobham to acquire Ultra, which makes submarine-hunting equipment as well as control systems for the fleet of Trident submarines that carry the UK's nuclear deterrent. Ultra Electronics said that the proposed undertakings are now subject of public consultation. If the secretary of state's formal approval is received following completion of the consultation, the next key step for the acquisition will be sanction by the court at the scheme court hearing.

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Essentra said it has sold its packaging business to Mayr-Melnhof Group, marking a "significant" step to becoming a pure-play Components business. As part of the deal, the Milton Keynes, England-based plastic and fibre products maker sold ESNT Packaging & Securing Solutions and Essentra Packaging US, along with its subsidiaries. The sale price of GBP312 million implies a 12.4 multiple on earnings before income, tax, depreciation and amortisation of GBP25.2 million. Essentra said it intends to use the cash to strengthen its balance sheet, and make a small contribution to the company's defined-benefit pension schemes.

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COMPANIES - SMALL CAP

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Oil field services provider Lamprell said it has received a cash takeover offer from 25% shareholder Blofeld Investment Management, but at a deep discount to its current share price. The United Arab Emirates-based provider of oil field services provider said it was considering the possible offer in light of its liquidity position and the funding requirements of USD75 million over the next two months. Lamprell said Blofeld's proposal is at a "very significant discount" to its current share price and any acceptable offer would need to include an interim funding solution or bridge financing. Further, the pair have been in discussions for more than two months but have not reached agreement on the price. Lamprell shares closed on Thursday in London at 22.10 pence, giving the company a market capitalisation of just above GBP90 million. The stock is down 66% over the past 12 months. Lamprell said the board has been in "frequent discussions" over the last three months with its two largest shareholders, Lamprell Holdings and Blofeld, over a potential equity fundraise of up to USD150 million. In addition, Lamprell said it ended talks, announced in March, for the sale of Oil & Gas business, which had yielded little progress. "It became apparent during the course of negotiations that such a disposal on the terms proposed, would be highly problematic to execute and would ultimately leave the group without a viable business going forward. Furthermore, the board believes the proposal significantly undervalued the assets of the business," Lamprell explained.

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Friday's shareholder meetings

AFC Energy PLC - GM re fees for non-executive directors

Avast PLC - AGM

Devolver Digital Inc - AGM

Entain PLC - AGM

Gulf Keystone Petroleum Ltd - AGM

Hawkwing PLC - AGM

Invesco Bond Income Plus Ltd - AGM

Life Science REIT - AGM

Northcoders Group PLC - AGM

Princess Private Equity Holding Ltd - AGM

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By Tom Waite; thomaslwaite@alliancenews.com

Copyright 2022 Alliance News Limited. All Rights Reserved.

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