LONDON BRIEFING: Barclays Says Credit Impairments On Downward Path

(Alliance News) - Barclays got the UK bank reporting season underway on Friday with higher ...

Alliance News 23 October, 2020 | 8:13AM
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(Alliance News) - Barclays got the UK bank reporting season underway on Friday with higher third-quarter profit and reassurance that loan impairments are set to be lower in the second half of the year than the first and lower still in 2021, despite the ongoing Covid-19 pandemic.

Pretax profit for the three months ended September came in at GBP1.1 billion, up sharply from GBP200 million a year earlier, bumping up Barclays' return on tangible equity to 5.1% from 2.4%. Third-quarter group income declined 6% to GBP5.2 billion, however.

Lower risk-weighted assets, however, meant the lender's CET1 ratio improved to 14.6% from 13.8% at the end of December and 13.4% in September 2019.

Barclays booked a credit impairment charge of GBP600 million, up 32% annually but down 63% quarterly. It expects impairment charges to be "materially" lower in the second half of 2020 compared to the first and to be lower again in 2021 from 2020.

The lender did not declare a dividend, though Chief Executive Officer James Staley said he recognises "the importance of capital returns to shareholders and will provide an update on its policy and dividends at full year results".

HSBC follows Barclays in reporting results on Tuesday next week, followed by Bank of Ireland on Wednesday, and both Lloyds Banking and Standard Chartered on Thursday.

Barclays shares were up 3.5% 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 0.5% at 5,816.02

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Hang Seng: up 0.3% at 24,851.61

Nikkei 225: closed up 0.2% at 23,516.59

DJIA: closed up 152.84 points, or 0.5%, at 28,363.66

S&P 500: closed up 0.5% at 3,453.49

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GBP: down at USD1.3056 (USD1.3095)

EUR: down at USD1.1796 (USD1.1825)

Gold: up at USD1,906.32 per ounce (USD1,898.00)

Oil (Brent): down at USD42.18 a barrel (USD42.70)

(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

0930 BST UK CIPS-Markit flash purchasing managers' index for manufacturing and services

0930 CEST Germany flash PMI

1000 CEST EU eurozone flash PMI

0945 EDT US flash manufacturing and services PMI

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Retail sales in the UK climbed in September, official data showed, topping consensus estimates. Retail sales volumes were 1.5% higher monthly, according to the Office for National Statistics, following growth of 0.8% in August. Consensus compiled by FXStreet forecast growth of 0.4% monthly, so September sales outperformed expectations. The ONS noted it was the fifth successive month of growth, "resulting in an increase of 5.5% when compared with February's pre-pandemic level". Year-on-year, sales volumes were up 4.7%, topping market estimates of 3.7% growth and following a 2.8% rise in August. Online accounted for 28% of sales in September, compared to 20% in February.

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Operating conditions in Japanese private sector deteriorated further in October, flash figures from IHS Markit showed, as external demand continued to weaken. The headline au Jibun Bank Japan manufacturing purchasing managers' index - which measures the overall health of the manufacturing sector - edged up to 48.0 in October from 47.7 recorded in September, signalling the slowest deterioration since January. The services business activity index, meanwhile, dropped to 46.6 in October from 46.9 seen in September, indicating a further sharp decline in output across the services sector.

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Japan's core consumer prices fell 0.3% year-on-year in September, government data showed. The core consumer price index, excluding fresh food, stood at 101.3 in September against a base of 100 for 2015, according to the Ministry of Internal Affairs & Communications. Month-on-month and seasonally adjusted core CPI was up 0.1% in September. Consumer prices in Japan were down 0.4% year-on-year in August.

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BROKER RATING CHANGES

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LIBERUM REINITIATES IAG WITH 'HOLD' - PRICE TARGET 10 PENCE

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BARCLAYS RAISES GAMMA COMMUNICATIONS PRICE TARGET TO 1850 (1700) PENCE - OVERWEIGHT

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JEFFERIES RAISES GB GROUP PRICE TARGET TO 888 (743) PENCE - 'HOLD'

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COMPANIES - FTSE 100

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London Stock Exchange Group boss David Schwimmer hailed the firm's "resilient" third-quarter, which also saw it make "good progress on the highly attractive Refinitiv transaction". In the three months ended September. revenue climbed 1% yearly to GBP524 million. Total income, including its CCP business, climbed 2% to GBP600 million. Gross profit was up 4% to GBP551 million. "We continue to engage constructively with the European Commission and believe the potential divestment of the Borsa Italiana group will contribute significantly to addressing the EU's competition concerns," Schwimmer added. LSEG agreed to sell the unit that owns the Milan stock exchange to rival Euronext for EUR4.33 billion earlier in October.

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InterContinental Hotels said its decline in RevPAR eased to 53% in the third quarter, compared to 75% in quarter two, leaving the year-to-date figure down 52%. Occupancy climbed to 44% from 25%. "Trading improved in the third quarter, although progress continues to vary by region," Chief Executive Officer Keith Barr said. "Domestic mainstream travel remains the most resilient, and our industry-leading Holiday Inn brand family positions us well to meet that demand as it slowly returns."

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COMPANIES - MAIN MARKET AND AIM

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Retirement homes developer McCarthy & Stone agreed to a GBP630 million takeover from Mastiff Bidco, a wholly-owned indirect subsidiary of Lone Star Real Estate Fund VI. The offer values McCarthy & Stone shares at 115 pence each, a 39% premium to its Thursday closing price. "The McCarthy & Stone directors, who have been so advised by Rothschild & Co and Deutsche Bank as to the financial terms of the acquisition, consider the terms of the acquisition to be fair and reasonable," the company said.

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COMPANIES - GLOBAL

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Huawei's revenue growth slowed significantly in the first nine months of 2020, the Chinese telecom gear maker said, citing "intense pressure" on operations during the coronavirus and as the US moves to cut off its access to vital components. Huawei, the leading global supplier of telecoms networking equipment and a top smartphone producer, said it grossed CNY671.3 billion, about USD100.7 billion, in revenue in January-September, up 9.9% year-on-year. That's down from 24% growth over the same period last year, while its profit margin fell to 8.0% from 8.7% last year. Washington views Huawei, founded in 1987 by former People's Liberation Army engineer Ren Zhengfei, as a Chinese espionage threat and has lobbied allies to shun its gear while attempting to block its access to global semiconductor supplies.

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Friday's Shareholder Meetings

Collagen Solutions PLC - AGM

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By Tom Waite; thomaslwaite@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
GB Group PLC 799.00 GBX -1.36 -
Gamma Communications PLC 1,610.00 GBX 0.31 -
Barclays PLC 139.50 GBX -1.13
International Consolidated Airlines Group SA 160.85 GBX -2.31 -

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