LONDON MARKET MIDDAY: BP And Standard Chartered Results Lift FTSE 100

LONDON (Alliance News) - A positive wave of earnings reports helped the FTSE 100 rise midday Tuesday, with first-quarter results from emerging markets focused bank Standard Chartered and oil and gas major BP both beating market expectations.

Standard Chartered shares rose 10% after reporting lower-than-expected impairment charges for bad loans in the first quarter of 2016.

First-quarter impairment losses on bad loans improved slightly to USD471 million in the quarter from USD476 million year on year, and shrank from the USD1.13 billion seen in the final three months of 2015. Analysts at UBS said in a note that loan losses was USD805 million lower than they had estimated prior to the results.

"In no way are we declaring victory," Standard Chartered Chief Executive Bill Winters told reporters on a conference call. "Let's keep in mind that we don't feel like we've fully rounded the corner at this point given that non-performing loans are still increasing, albeit at a slower pace."

Gross non-performing loans in the bank's ongoing business increased by USD425 million in the three months to March 31 to USD5.67 billion, largely as a result of a "small number" of commodity-linked exposures. Commodity prices have remained under pressure amid China's economic slowdown.

Pretax profit fell to USD589 million in the three months ended March 31 from USD1.44 billion in the corresponding quarter a year earlier, the bank said.

BP traded up 4.3%, as the company swung to a loss in the first quarter of 2016 from a year before, impacted by weak oil prices but kept its dividend flat as results improved on the fourth quarter of 2015.

BP said its loss for the first quarter was USD583.0 million, compared to a USD2.6 billion profit a year earlier. The loss narrowed from the USD3.3 billion loss made in the fourth quarter of 2015.

Underlying replacement cost profit, the preferred measure for analysts, fell to USD532.0 million from USD2.58 billion a year earlier but again improved on the USD196.0 million profit in the fourth quarter. According to RBC Capital Markets, the figure was ahead of market consensus, which estimated a USD140.0 million loss by that measure in the quarter.

The bank said the beat was primarily down to the out-performance in BP's downstream business. BP said its underlying replacement cost profit slipped in its downstream business to USD1.81 billion from USD2.16 billion a year earlier, but was up around 48% from the USD1.22 billion at the end of the fourth quarter. The result was also significantly higher than RBC's estimate of USD900.0 million, and above consensus at USD1.12 billion.

"The downstream business has been a saving grace," said Jasper Lawler, market analyst at CMC Markets. "The downstream business looks to have gotten a boost from BP's trading arm, which appears to have called the rebound in oil correctly."

The FTSE 100 index ticked up 0.2%, or 14.6 points, to 6,275.52. The FTSE 250 was down 0.1% to 16,956.31 and the AIM All-Share was down 0.2% at 730.19.

In Europe, the CAC 40 in Paris was down 0.1% and the DAX 30 in Frankfurt was up 0.1%.

Ahead of the open on Wall Street, futures pointed the Dow Jones Industrial Average up 0.2%, while the S&P 500 and Nasdaq 100 are both indicated up 0.1%.

Earnings season across the pond also is in full swing. The highlight for Tuesday is first-quarter earnings from technology giant Apple after the New York closing bell. Apple will be joined by social media company Twitter, telecommunications firm AT&T, and e-commerce company eBay.

Elsewhere in London, Whitbread reported growth in profit in its recently-ended financial year driven by sales growth at both the Premier Inn and Costa brands, and said it is confident in making further progress in the new year.

The hotel and coffee shop owner said its pretax profit in the year ended March 3 grew to GBP487.7 million from GBP463.8 million the year before, as revenue rose to GBP2.92 billion from GBP2.61 billion.

By division, total sales at Premier Inn grew by 13% with like-for-like sales up by 4.2%. At Costa, total sales were up by 16%, with system sales increasing by 15% and UK like-for-likes up by 2.9%.

Whitbread will pay a total dividend of 90.35 pence for the year, a 10% increase on the 82.15p paid the year before. The stock was up 1.3% at midday.

Defence technology company Cobham was far and away the worst performer in the FTSE 250, down 20% at 172.00 pence. The company said trading in the first quarter missed its expectations and said it will launch a GBP500.0 million rights issue in the second quarter of 2016.

Cobham said its trading profit in the first quarter was GBP15.0 million, well behind the GBP50.0 million made in the first quarter of 2015.

The weaker performance was driven by operational issues in its wireless division which resulted in delayed shipments and the company booking a GBP9.0 million one-off charge. This was exacerbated by challenges in its commercial fly-in fly-out business and cost increases in development programmes in its Advanced Electronics Solution segment.

The stock fell to a low of 169.40p Tuesday, its lowest price since the end of 2011.

Energy consultancy RPS Group said its results for 2016 will be weaker year-on-year as it continues to face challenges in the oil and gas sector, and said it has acquired a UK-based business.

RPS said it has seen significant reductions in the spending plans of customers in the oil and gas industry going into 2016, which has hit new commissions in all its oil and gas-exposed businesses in the first quarter.

The company has continued to cut costs to cope with the problems and while its BNE:Europe business has continued to perform well, due to its lower exposure to oil and gas, the problems in the oil industry have weighed on the wider business.

RPS expects its results to improve over the course of the year as it benefits from the cost cuts it has made, but without an improvement in market conditions, its overall results will be weaker year-on-year. The stock was down 15% and the second worst performer in the FTSE All-Share.

Still ahead in the economic calendar, US durable goods data are at 1330 BST. The Redbook index is due at 1355 BST, while Markit's US services Purchasing Manager's Index is at 1445 BST. US consumer confidence data are at 1500 BST, as well as the Richmond Fed manufacturing index.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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