LONDON MARKET PRE-OPEN: Barclays Launches GBP700 Million Buyback

(Alliance News) - Stock prices in London are seen opening slightly higher on Thursday, rebounding from a lower close on Wednesday, as earnings season continues apace.

In early company news, UK lender Barclays said it will start a GBP700 million share buyback programme and resumed paying dividends. Medical devices maker Smith & Nephew reported a fall in 2020 earnings. Residential landlord Grainger poached its new finance head from FTSE 250 peer St Modwen Properties.

IG futures indicate the FTSE 100 index is to open 13.00 points higher at 6,723.90. The blue-chip index closed down 37.96 points, or 0.6%, at 6,710.90 Wednesday.

Barclays said it delivered a resilient performance in 2020 against challenges posed by the coronavirus pandemic.

For 2020, Barclays posted net income of GBP21.77 billion, up 1% from GBP21.63 billion in 2019, as net interest income fell 14% to GBP8.12 billion from GBP9.41 billion.

Barclays booked GBP4.84 billion in credit impairments in 2020, more than doubled from GBP1.91 billion in 2019.

Pretax profit sank 30% to GBP3.07 billion from GBP4.36 billion. However, the figure beat company-compiled consensus which forecast pretax profit of GBP2.81 billion.

Common equity tier 1 ratio - a key measure of a bank's financial strength - was 15.1% in 2020, up from 13.8% in 2019. The figure beat market consensus of 14.7%.

The Corporate & Investment Bank unit's income was GBP12.5 billion, with both Markets and Banking achieving "their best ever income performance", the lender said.

Barclays declared a dividend of 1.0 pence for 2020, down from 3.0p in 2019.

In addition, Barclays said it intends to initiate a share buyback of up to GBP700 million, which is expected to commence in the first quarter of 2021.

Chief Executive Officer Jes Staley said: "Given the strength of our business, we have decided the time is right to resume capital distributions. We have today announced a total payout equivalent to 5p per share, comprising a 1p 2020 full year dividend and the intention to initiate a share buyback of up to GBP700m. We expect to comment further on capital distributions when appropriate.

"Barclays remains well capitalised, well provisioned for impairments, highly liquid, with a strong balance sheet, and competitive market positions across the group. We expect that our resilient and diversified business model will deliver a meaningful improvement in returns in 2021."

Smith & Nephew reported a fall in annual earnings as the coronavirus pandemic caused elective surgical procedures to be put on hold.

"Trading across the year was impacted, with the second quarter being particularly badly affected as healthcare systems shut down elective procedures to focus on providing treatment to COVID-19 patients," the company said.

For 2020, revenue was down 11% to USD4.56 billion from USD5.14 billion in 2019 and trading profit fell sharply to USD683 million from USD1.17 billion.

The company declared a full-year dividend of 37.5 US cents per share, unchanged from 2019, reflecting "confidence in the business and strength of the balance sheet".

Looking ahead to 2021, Smith & Nephew said the outlook reflects the likely continuation of Covid-19 effects during the first half of 2021 and the uncertainty regarding the timing and pace of recovery.

"We start 2021 with three clear priorities: to return to top-line growth and recapture momentum; to drive further operational improvement; and to continue to respond effectively to COVID-19. We will build on the progress we are starting to make in areas where we have recently invested and introduced innovation. We will again invest more in R&D and I am excited by the pipeline of new technologies approaching launch, and by the potential of our recent acquisitions," said CEO Roland Diggelmann.

St Modwen Properties said Chief Finance & Operations Officer Rob Hudson will leave the property company in order to become CFO of residential landlord Grainger. St Modwen said it has now begun the formal process to appoint a successor, noting Hudson has a 12-month notice period and will leave at a mutually agreed time.

Hudson had served as interim CEO of St Modwen from April to October last year, before the arrival of Sarwjit Sambhi in November.

At Grainger, Hudson will succeed Vanessa Simms, whose departure was announced back in October, and is expected to start later this year.

London stocks were seen opening higher with sentiment been underpinned by hopes US President Joe Biden's massive USD1.9 trillion stimulus package will be passed, as well as ongoing optimism over vaccine rollouts.

CMC Markets analyst David Madden said: "In recent weeks global stock markets have been in rude health as traders have been banking on the Biden administration to approve the proposed USD1.9 trillion stimulus scheme. In addition to that, the progress made with respect to the distribution of vaccines has added to the positive move too. On Monday, it was confirmed the UK hit its vaccine target - vaccinating 15 million people by 15 February.

"The update triggered chatter that Britain could ease up on some of its restrictions in the next few weeks, so that contributed to the wider view the global economy will recover from the pandemic in the months ahead."

The pound was quoted at USD1.3855 early Thursday, up slightly from USD1.3845 at the London equities close Wednesday.

UK Prime Minister Boris Johnson is awaiting new data on the effects of vaccines on coronavirus after stressing he will take a "cautious and prudent approach" to easing England's national lockdown.

Johnson is understood to be expecting updated evidence of jabs' effect on hospital admissions and deaths to be with him by the end of Friday, ahead of setting out his "road map" next week.

But it was unclear whether the early data would include vaccines' effect on transmission, with the results of two key Public Health England studies possibly not available until next month.

Johnson stressed on Wednesday that any easing of restrictions needs to be in stages and in an "irreversible" way as he was urged to focus on the evidence rather than deadlines when lifting restrictions.

The euro was priced at USD1.2046, higher against USD1.2036. Against the yen, the dollar was trading at JPY105.91, up from JPY105.82.

Brent oil was quoted at USD65.07 a barrel Thursday morning, up sharply from USD63.53 late Wednesday, as US refining and extraction capacity remains shuttered due to deadly wintry conditions in Texas.

Gold was trading at USD1,783.15 an ounce, higher versus USD1,774.53.

The Japanese Nikkei 225 index closed down 0.2% on Thursday. In China, the Shanghai Composite ended up 0.6%, while the Hang Seng index in Hong Kong was down 1.3%. Financial markets in Shanghai reopened after being closed over the past week for the Lunar New Year holiday. The S&P/ASX 200 in Sydney ended flat.

In the economic calendar for Thursday, there is Irish inflation at 1100 GMT and US initial jobless claims at 1330 GMT.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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