(Alliance News) - Britain's biggest banks have become the latest to scrap billions of pounds in dividends, as businesses scramble to save money by stopping payments to shareholders amid the coronavirus outbreak.
Barclays, Lloyds Banking, HSBC, Royal Bank of Scotland and Standard Chartered all confirmed on Wednesday they have suspended dividend and share buybacks in 2020. The banks will also not be paying final dividends for 2019.
It comes after a request from the Bank of England's Prudential Regulation Authority that they suspend all plans to return money to shareholders.
Alongside HSBC's dividend announcement, the bank said its performance was resilient in the first quarter against a backdrop of "difficult economic conditions".
"However, as a result of the global impacts of Covid-19, and its impact on interest rates, market levels and the forward economic outlook, we expect reported revenues to be impacted in insurance manufacturing, and credit and funding valuation adjustments in Global Banking & Markets, alongside higher Expected Credit Losses," the China-focused lender said.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 2.7%, at 5,518.33
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Hang Seng: down 2.5% at 23,025.29
Nikkei 225: closed down 4.5% at 18,065.41
DJIA: closed down 410.32 points, 1.8%, at 21,917.16
S&P 500: closed down 1.6% at 2,584.59
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GBP: down at USD1.2348 (USD1.2435)
EUR: flat at USD1.0992 (USD1.0996)
Gold: down at USD1,587.83 per ounce (USD1,609.09)
Oil (Brent): down at USD25.30 a barrel (USD26.61)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's Key Economic Events still to come
0930 BST UK CIPS-Markit manufacturing purchasing managers' index
0955 CEST Germany manufacturing PMI
1000 CEST EU eurozone manufacturing PMI
0700 EDT US MBA weekly mortgage applications survey
0815 EDT US ADP national employment report
0945 EDT US manufacturing PMI
1000 EDT US ISM manufacturing report on business
1000 EDT US construction spending - construction put in place
1030 EDT US EIA weekly petroleum status report
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UK government ministers are under growing pressure to increase the rate of testing for coronavirus, as a 13-year-old boy became the first known child in the UK to die with the disease. A 19-year-old with no existing medical issues has also died and the UK saw its biggest day-on-day rise in the number of deaths since the outbreak began – up 381 on 24 hours previously to a total of 1,789. NHS staff have expressed frustration they are being forced to self-isolate just as they are most needed, because tests are not available to show whether they are clear of the disease.
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Shop prices in the UK declined again in March, and at a faster pace than in February, numbers showed, with analysts predicting further pricing pressure due to the Covid-19 outbreak. According to the British Retail Consortium-Nielsen Shop Price Index, March shop prices fell by 0.8% year-on-year, compared to a 0.6% decrease in February. The March decline was much more significant than the 12-month average price retreat of 0.3% and the six-month average increase of 0.5%. British Retail Consortium Chief Executive Helen Dickinson said: "There are a number of price pressures arising from the coronavirus crisis. Food prices, particularly of fresh produce, may be impacted by higher costs on seasonal farm labour, while non-food prices will be pushed down by lower demand. It is likely that the combination of future economic uncertainty and job losses, whether realised or potential, will drive people to reconsider their spending patterns and to save more."
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The Irish manufacturing sector fell sharply into contraction in March at an eleven-year low, as the Covid-19 outbreak accelerated outside of China, causing disruption to supply chains, while depressing demand and confidence. Survey data from AIB and IHS Markit showed the AIB manufacturing purchasing managers' index stood at 45.1 in March down from 51.2 in February. The reading was well below the neutral 50.0 mark, and reflected the sharpest downturn since August 2009.
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China returned to broadly stable manufacturing activity during March, survey results from Caixin showed, after deteriorating at the quickest pace in February. The Chinese headline seasonally adjusted purchasing managers' index rose to 50.1 in March from a record low of 40.3 in February. This marked a strong improvement from the previous month when the nation imposed strict measures to stem the spread of Covid-19. Any score above 50 represents expansion, while one below contraction. "The March expansion in the manufacturing sector returned to a level seen before the coronavirus epidemic," noted Zhengsheng Zhong, chair & chief economist at CEBM Group.
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Japan's manufacturing sector fell further into contraction in March, to a nine-year low, as the Covid-19 pandemic caused a sharp fall in output amid a decline in new orders. The Jibun Bank Japan manufacturing purchasing managers' index fell to 44.8 in March from 47.8 in February. This was its lowest mark since April 2011, which was in the immediate aftermath of the tsunami that struck the island that year. The main drags on the PMI reading March were a fall in new orders and output, with the virus outbreak leading to the sharpest decline in demand for Japanese goods for almost nine years.
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US President Donald Trump has warned Americans to brace for a "hell of a bad two weeks" amid White House projections of between 100,000 to 240,000 coronavirus deaths in the US even if social distancing guidelines are maintained. Public health officials stressed the shocking number could be less if people across the country were diligent in keeping their distance from one another. "We really believe we can do a lot better than that," said Deborah Birx, the coordinator of the White House coronavirus task force, adding Americans needed to take seriously their role in preventing the spread of disease. Trump said it was "a matter of life and death" for Americans to heed his administration's guidelines. But he predicted the country would soon see a "light at the end of the tunnel" in a pandemic that has killed more than 3,500 Americans and infected 170,000 more.
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BROKER RATING CHANGES
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RBC RAISES INTERCONTINENTAL HOTELS GROUP TO OUTPERFORM (SECTOR PERFORM) - TARGET 4000 (4500) PENCE
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HSBC RAISES MITCHELLS & BUTLERS TO 'BUY' ('HOLD') - TARGET 270 (425) PENCE
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HSBC RAISES MARSTONS TO 'HOLD' ('REDUCE') - TARGET 40 (90) PENCE
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BERENBERG RAISES ULTRA ELECTRONICS TO 'BUY' ('HOLD') - TARGET 2300 PENCE
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BERENBERG RAISES CHEMRING GROUP TO 'BUY' ('HOLD') - TARGET 235 PENCE
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COMPANIES - FTSE 100
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Auto Trader said it will embark on an equity raise to strengthen its balance sheet "through this period of uncertainty". Action has already been taken to remove the majority of discretionary spending, including marketing, the car seller said, and the company's balance sheet is "strong". At the end of February, Auto Trader said it had drawings of GBP289 million on its GBP400 million revolving credit facility, with a net debt to Ebitda ratio of 1.1 times, "well below" the covenant level of 3.5 times. To further bolster the balance sheet, Auto Trader intends to conduct a placing of up to 46.5 million shares, representing around 5% of its issued share capital. The placing will be conducted via an accelerated bookbuild. On Tuesday's closing price of 439.10 pence, the placing would be worth up to GBP204.0 million.
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COMPANIES - FTSE 250
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QinetiQ said it has continued to perform in line with expectations, but wants to "adopt a prudent course of action" and postpone a decision on a full-year dividend due to Covid-19. The defence firm said that following on from a strong first half it continued to perform in line with forecasts during the remainder of the financial year, which ended on Tuesday, despite Covid-19. "With a strong balance sheet and order backlog of nearly GBP3bn we enter FY21 from a position of strength, however we are realistic that restrictions imposed by governments internationally to counter the spread of Covid-19 will have an impact on revenues," said QinetiQ. The firm has decided to postpone a decision on proposing a final dividend until later in the year, when there is greater clarity.
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Estate agent Savills has withdrawn proposed dividends in order to "retain sufficient cash reserves". In March, the firm said it intended to pay a final dividend of 12.05p and a supplemental interim dividend for 15.0p per share for 2019. "Notwithstanding the group's strong balance sheet, in view of the current uncertainty over the impact of Covid-19 on global real estate market activity in the coming months, Savills is withdrawing these previously announced proposed dividends in order to retain sufficient cash reserves to mitigate the effect," Savills said. Instead, the board will consider an "enhanced" interim dividend "on or around the revised date of the AGM", which has been pushed back to June 25. If declared, it will take the place of both the proposed ordinary and supplemental interim dividends. "The quantum will be based on the group's performance in 2019 and the first half of 2020. It will also be dependent upon the board's then assessment of the likely duration of continued market disruption as a result of Covid-19 and the level of retained cash reserves then deemed prudent," the FTSE 250 constituent said.
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COMPANIES - INTERNATIONAL
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The Trump administration rolled back rules that pushed automakers to make cars more fuel efficient, relaxing the gas mileage standards for new models. US Secretary of Transportation Elaine Chao said the move would be good for both auto makers and people looking to buy cars. The decision is expected to help lower the cost of new cars, thereby enabling more purchases of vehicles, which the administration argues is better for safety. It will also lead to an increase in greenhouse gas emissions. The rule guts regulations imposed by former US president Barack Obama, who had called for carmakers to improve standards by nearly 5 per cent each year. Trump is now setting an emissions standard improvement of just 1.5 per cent each year through model year 2026. Earlier reported proposals by the White House were pushing to scrap all efficiency standards.
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Wednesday's Shareholder Meetings
Premier Veterinary Group
Primary Health Properties
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By Tom Waite; thomaslwaite@alliancenews.com
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