TOP NEWS SUMMARY: Saudi Bank Merger To Give RBS GBP700 Million Lift

(Alliance News) - The following is a summary of top news stories ...

Alliance News 17 June, 2019 | 11:23AM
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(Alliance News) - The following is a summary of top news stories Monday.
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COMPANIES
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Royal Bank of Scotland said the completion of the merger between two Saudi Arabia based banks - Alawwal bank and Saudi British Bank - will lead to a "positive and material financial impact" on the UK listed lender. RBS, through its Dutch-domiciled investment bank NatWest Markets, was part of a consortium including Stichting Administratiekantoor Beheer Financiele Instellingen and Spain's Banco Santander SA that held an aggregate 40% equity stake in Alawwal bank. The interest of RBS was equivalent to a 15.3% shareholding in Alawwal bank. RBS said as a result of the merger completion on Sunday, the NatWest Markets unit would recognise an income gain on the disposal of the Alawwal bank stake for shares in Saudi British Bank of GBP400 million and a reduction in risk weighted assets of GBP4.7 billion. RBS will remove legacy liabilities of GBP300 million due to the merger. In total, RBS will record a GBP700 million profit attributable to shareholders as a result of the Saudi bank combination. It also anticipates the merger to increase its CET1 core capital ratio at March 31 by 60 basis points, being 20 points from attributable profit and 40 points from the reduction in risk weighted assets.
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Airtel Africa is looking to raise around GBP595 million in its London initial public offering, the telecommunications and mobile money firm confirmed. Airtel Africa - which operates in 14 countries in Africa - has almost 100 million subscribers, making it the second largest mobile operator on the continent. Plans to float were first announced earlier in June. The IPO has been priced at 80 pence to 100p a share, with Airtel offering 595.2 million to 744.0 million new shares. Final pricing will be announced on June 28, with shares to start trading in London on the same day. It will have a free float of at least 25%, and will become eligible for FTSE UK indices. Airtel's market capitalisation following admission would be between GBP3.01 billion and GBP3.62 billion.
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Kier Group said it will cut 1,200 jobs, as it suspended dividend payments and earmarked several business for disposal in order to get its balance sheet under control. The FTSE 250 construction firm has put up for sale Kier Living, its housebuilding business, saying that despite being a strong business it would require significant funding to keep growing. So far there have been "a number" of expressions of interest. Kier Property also has been put up for sale, with the investment required likewise "incompatible" with Kier's capital requirements. As well, Kier will be quitting the Management and Environmental Services businesses. Kier has suspended dividend payments for its year ending June, and the following financial year. At the interim stage, Kier slashed its first half dividend 79% to 4.9 pence a share. The business sales and dividend suspension are expected by Kier to lead to a "material reduction" in overall debt, and the focus going ahead will be on Regional Building, Infrastructure, Utilities, and Highways.
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Babcock International Group confirmed it rejected in January an approach from outsourcing peer Serco Group. The proposal was unsolicited and "highly preliminary", Babcock said, and involved an all-share merger. No further proposal has been received since January. "The board of Babcock, together with its advisers, carefully considered the proposal and unanimously rejected it, having concluded a combination of the two companies had no strategic merit and was not in the best interests of Babcock's shareholders, customers or wider stakeholders," said the company. The Sunday Times had reported Serco made at least two attempts to merge with Babcock.
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MARKETS
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London shares were higher ahead of monetary policy decisions by three central banks this week - the US Fed, the Bank of England and the Bank of Japan. RBS was the best blue-chip performer, up 2.2%. In the FTSE 250, Kier was the worst performer, down 10%. Wall Street was pointed to a higher open.
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FTSE 100: up 0.2% at 7,357.12
FTSE 250: up 0.3% at 19,184.50
AIM ALL-SHARE: up 0.1% at 937.81

GBP: down at USD1.2585 (USD1.2604)
EUR: down at USD1.1214 (USD1.1222)

GOLD: down at USD1,333.84 per ounce (USD1,349.52)
OIL (Brent): down at USD61.72 a barrel (USD62.00)

(changes since previous London equities close)
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ECONOMICS AND GENERAL
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The British Chamber of Commerce cut its UK growth forecasts for the next two years, it revealed, despite a more positive outlook on 2019. For 2020, the BCC has cut its growth forecast to 1.0% from 1.3%, and for 2021 to 1.2% from 1.4%. However, for 2019, the BCC upgraded its UK growth estimate to 1.3% from 1.2%, mainly due to "exceptionally rapid" stockbuilding early in 2019, as manufacturers prepared for the intended end-March Brexit. "However, the immediate boost to UK GDP is forecast to come at the cost of more subdued growth in 2020 and 2021 as the unwinding of historically-high inventory levels, coupled with weaker business investment, weigh on economic activity," said the BCC. These forecasts assume the UK avoids a "messy and disorderly" exit from the EU.
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UK house prices have increased month-on-month, but made no movement on an annual basis, according to figures released by Rightmove. Asking prices in June rose by 0.3% month-on-month compared to May; however there was no movement on an annual basis. For London alone however, asking prices slipped by 0.4% month-on-month, and declined by 2.0% annually.
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Boris Johnson's Tory leadership bid has received a new boost with the backing of Health Secretary Matt Hancock who pulled out of the contest last week. Despite having ruled out a no-deal Brexit during his campaign, in contrast to Johnson, he said the former foreign secretary was now the best candidate to re-unite the fractured Conservative Party. His endorsement came after the clear frontrunner was criticised for failing to appear in the first of the televised leadership debates staged by Channel 4 on Sunday evening.
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Huawei founder Ren Zhengfei said the company expects a 40% drop in its international smartphone sales this year in the aftermath of being blacklisted by the US. Huawei's revenue is expected to be USD30 billion less than previously forecast over the next two years, reaching USD100 billion annually, he said. The projected shortfall would leave revenue roughly flat when compared to 2018. Ren spoke at an event with international academics at the company's headquarters, in Shenzhen. US President Donald Trump last month placed Huawei on a blacklist of companies whose business relationships with US partners are tightly controlled. Some of Huawei's key partners, including Alphabet's Google, whose Android operating system has been running on all Huawei smartphones, as well as chipmakers Intel, Qualcomm and Broadcom, are restricted from doing business with the Chinese telecoms giant.
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Securities Mentioned in Article
Security Name Price Change (%) Morningstar Rating
The Royal Bank of Scotland Group PLC 184.50 GBX -0.08
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