LONDON BRIEFING: NatWest Joins Other UK Banks In Trimming Impairments

(Alliance News) - NatWest Group on Friday rounded off a week of surprisingly good UK bank ...

Alliance News 30 October, 2020 | 8:12AM
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(Alliance News) - NatWest Group on Friday rounded off a week of surprisingly good UK bank earnings, swinging to a profit in the third quarter while saying credit provisions for the year will 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.

NatWest shares were up 4.4% in early trade Friday.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: down 0.6% at 5,545.84

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Hang Seng: down 2.1% at 24,073.72

Nikkei 225: closed down 1.5% at 22,977.13

DJIA: closed up 139.16 points, or 0.5%, at 26,659.11

S&P 500: closed up 1.2% at 3,310.11

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GBP: up at USD1.2925 (USD1.2902)

EUR: up at USD1.1682 (USD1.1661)

Gold: up at USD1,872.62 per ounce (USD1,869.88)

Oil (Brent): firm at USD37.66 a barrel (USD37.56)

(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 GMT UK insolvency statistics

0930 CET EU EuroCOIN indicator of euro area economic activity

1100 CET EU preliminary flash estimate gross domestic product

1100 CET EU flash estimate euro area inflation

1100 CET EU unemployment

0830 EDT US personal income and outlays

1000 EDT US University of Michigan survey of consumers

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Annual growth in UK house prices reached a five-year higher in October, according mortgage lender Nationwide. Annual house price growth was 5.8% in October, its fastest since January 2015 and accelerating from 5.0% in September. The average price of a house in the UK is now GBP227,826. Prices rose 0.8% month-on-month after seasonal adjustments, following a 0.9% rise in September. However, Nationwide Chief Economist Robert Gardner cautioned: "The outlook remains highly uncertain and will depend heavily on how the pandemic and the measures to contain it evolve as well as the efficacy of policy measures implemented to limit the damage to the wider economy. Behavioural shifts as a result of Covid-19 may provide support for housing market activity, while the stamp duty holiday will continue to provide a near term boost by bringing purchases forward. However, activity is likely to slow in the coming quarters, perhaps sharply, if the labour market weakens as most analysts expect, especially once the stamp duty holiday expires at the end of March."

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BROKER RATING CHANGES

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BARCLAYS RAISES SHELL A AND B TO 'EQUAL WEIGHT' (UNDERWEIGHT) - PRICE TARGET 1500 PENCE

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DZ BANK CUTS FAIR VALUE FOR SHELL A TO 11.50 (14) EURO - 'HOLD'

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CREDIT SUISSE RAISES BOOHOO TO 'NEUTRAL' ('UNDERPERFORM') - PRICE TARGET 300 (320) PENCE

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COMPANIES - FTSE 100

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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.

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COMPANIES - GLOBAL

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Financial technology firm Lufax has raised USD2.4 billion ahead of its Wall Street debut Friday, a report said, marking one of the best US initial public offerings by a Chinese company this year, despite flaring tensions between Beijing and Washington. Lufax's Wall Street debut marks the latest by a Chinese firm this year, making the USD10.9 billion in 2020 the highest in six years. The company sold 175 million American Depository Receipts at USD13.50 apiece, Bloomberg News said, citing unnamed sources. Two ADRs represents one ordinary share. Backed by China's largest insurer by value Ping An Insurance Group, Lufax was launched in Shanghai in 2011 as one of a host of fintech start-ups focused on online lending service.

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French aircraft engine maker Safran confirmed its annual outlook as it reported a 45% year-on-year drop in revenue for the third quarter of 2020. Chief Executive Officer CEO Philippe Petitcolin said: "After a second quarter strongly hit by the impacts of the Covid-19 crisis on all activities, the third quarter has seen a lesser deterioration. Thanks to the efforts of Safran teams worldwide, the implementation very early in the year of an ambitious adaptation plan has been key in a context of a prolonged air traffic crisis, which allows us to confirm our financial targets for the end of the year." For the three months to September 30, the company's adjusted revenue amounted to EUR3.38 billion, down 45% from EUR6.10 billion recorded a year ago. On an organic basis, revenue decreased 42%, with declines coming from all divisions.

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Friday's Shareholder Meetings

MaxCyte Inc - AGM

Atlas Mara Ltd - AGM

Clinigen Group PLC - AGM

Vietnam Holding Ltd - GM re shares tender, fee arrangements

Ferro-Alloy Resources Ltd - AGM

Springfield Properties PLC - AGM

Zanaga Iron Ore Co Ltd - AGM

Sensyne Health PLC - AGM

Intosol Holdings PLC - AGM

Smartspace Software PLC - AGM

Anglesey Mining PLC - AGM

Gateley Holdings 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
Boohoo Group PLC 347.40 GBX 4.36 -
Royal Dutch Shell PLC B 1,343.40 GBX -1.19
NatWest Group PLC 154.50 GBX -0.64
Royal Dutch Shell PLC Class A 1,401.60 GBX -1.30

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