LONDON MARKET PRE-OPEN: NatWest Swings To Profit, Warns Of Challenges

(Alliance News) - Stock prices in London are seen opening lower on Friday following some ...

Alliance News 30 October, 2020 | 7:49AM
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(Alliance News) - Stock prices in London are seen opening lower on Friday following some disappointment over big US tech earnings reported late Thursday and against a backdrop of rising coronavirus cases and the looming US presidential election.

In early company news, state-backed UK lender NatWest swung to a profit in the third quarter but warned challenging times lie ahead. British Airways-parent International Consolidated Airlines swung to a loss in the third quarter, with difficulties in air travel "exacerbated by constantly changing government restrictions".

In London, IG futures indicate the FTSE 100 index is to open 64.35 points lower at 5,517.40. The blue-chip index closed just 1.05 points lower at 5,581.75 on Thursday.

NatWest Group swung to a profit in the third quarter and said provisions for the year would be at the lower end of a range previously guided.

For the quarter ended September 30, net interest income was down to GBP1.93 billion from GBP2.01 billion last year, and total income fell to GBP2.42 billion from GBP2.90 billion.

The lender, formerly known as Royal Bank of Scotland Group, swung to a operating profit of GBP355 million in the third quarter following a loss of GBP8 million at the same time last year. Attributable profit was GBP61 million, improved from a GBP315 million loss last year.

NatWest booked a further GBP254 million provision for expected bad loans.

Looking ahead, NatWest said its full-year impairment charge is likely to be at the lower end of the GBP3.5 billion to GBP4.5 billion range following the limited level of defaults across lending portfolios and associated expected credit losses stage migration within the third quarter. It also expects risk-weighted assets to be below the previously guided range of GBP185 billion to GBP195 billion at the end of 2020.

"Although impairments were relatively low in the quarter and we have seen some positive trends across our customer base, the full impact of Covid-19 remains very unclear. Challenging times lie ahead, especially as the current government support schemes come to an end and as new Covid-19 related restrictions are introduced," said Chief Executive Alison Rose.

International Consolidated Airlines said its earnings for the nine months of 2020 were severely hurt by the outbreak of Covid-19, which has caused significant damage to the global airline and travel sector.

For the nine months to September 30, revenue fell 66% to EUR6.57 billion from EUR19.29 billion last year. IAG swung to a pretax loss of EUR3.18 billion in the nine month period from a EUR1.81 billion profit in the same period last year. The company swung to an operating loss of EUR1.30 billion from an operating profit of EUR1.42 billion.

"These results demonstrate the negative impact of Covid-19 on our business but they're exacerbated by constantly changing government restrictions. This creates uncertainty for customers and makes it harder to plan our business effectively. We are calling on governments to adopt pre-departure testing using reliable and affordable tests with the option of post flight testing to release people from quarantine where they are arriving from countries with high infection rates," said CEO Luis Gallego.

"This would open routes, stimulate economies and get people travelling with confidence. When we open routes, there is pent-up demand for travel. However, we continue to expect that it will take until at least 2023 for passenger demand to recover to 2019 levels," added Gallego.

This week equity investors have been spooked by soaring virus cases in Europe and the US that have forced fresh lockdowns, while uncertainty ahead of Tuesday's US vote also is weighing on sentiment.

US President Donald Trump and challenger Joe Biden duelled Thursday over the crucial state of Florida, painting radically different visions of the US as big new GDP figures showed an improving economy even as Covid-19 infections reached record highs.

With Trump touting an early end to the health crisis, while warning of rampaging "socialists", and Biden slamming the US president as irresponsible and vowing to heal America's "soul", voters are facing a tough choice in five days.

On Thursday more than 91,000 new US infections were recorded, according to a Johns Hopkins University tally, the highest 24-hour total since the pandemic began.

In New York on Thursday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.5%, S&P 500 up 1.2% and Nasdaq Composite up 1.6%.

The Japanese Nikkei 225 index closed down 1.5% on Friday. In China, the Shanghai Composite ended down 1.5%, while the Hang Seng index in Hong Kong is down 1.8%.

Asian markets extended the week's losses in the wake of warnings from US giants late Thursday, including Apple, Amazon and Facebook, saying that the outlook was murky due to the damage caused by the coronavirus.

"After the close of cash trading in New York, Alphabet, Amazon, Apple and Facebook all posted their latest quarterly results, and the tech giants exceeded earnings per share and revenue forecasts. There were some pockets of weakness in the earnings updates, and US index futures pushed lower not long after the earnings were posted. The bearish sentiment spilled over to Asia and European indices are on track to open lower," said CMC Markets analyst David Madden.

The pound was quoted at USD1.2911 early Friday, firm from USD1.2902 at the London equities close Thursday.

Nearly a fifth of England will be under the toughest coronavirus restrictions after West Yorkshire became the latest area to be placed in Tier 3.

West Yorkshire will move into high level Tier 3 restrictions from Monday, with council leaders in the region saying they had negotiated a financial package worth an additional GBP59.3 million. It will take the total number of people in the highest level of restrictions to just over 11 million - 19.6% of the population.

The move adds to the mounting pressure to impose a national lockdown as the number of coronavirus cases and patients in hospital continues to climb.

The euro was quoted at USD1.1682 early Friday, up from USD1.1661 late Thursday in London. Against the yen, the dollar was trading at JPY104.28, down from JPY104.64.

Brent oil was trading at USD37.66 a barrel Friday morning, firm from USD37.56 a barrel at the London equities close Thursday. Gold was quoted at USD1,869.30 an ounce, flat from USD1,869.88.

In the economic calendar for Friday, there are eurozone GDP and unemployment readings at 1000 GMT and US personal consumption expenditures at 1230 GMT.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
NatWest Group PLC 155.50 GBX -1.14
International Consolidated Airlines Group SA 151.60 GBX -3.41

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