LONDON BRIEFING: Barclays Profit Falls 30% But Resumes Payouts

(Alliance News) - UK lender Barclays on Thursday resumed payouts to investors as it said it ...

Alliance News 18 February, 2021 | 8:09AM
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(Alliance News) - UK lender Barclays on Thursday resumed payouts to investors as it said it delivered a resilient performance in 2020 against challenges posed by the coronavirus pandemic.

For 2020, Barclays posted total income of GBP21.77 billion, up 1% from GBP21.63 billion in 2019, but 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."

Barclays shares were down 0.7% in early trade Thursday.

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

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MARKETS

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FTSE 100: up 0.1% at 6,714.61

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Hang Seng: down 1.6% at 30,601.55

Nikkei 225: closed down 0.2% at 30,236.09

DJIA: closed up 90.27 points, or 0.3%, at 31,613.02

S&P 500: closed down 1.26 points at 3,931.33

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GBP: up at USD1.3860 (USD1.3845)

EUR: up at USD1.2050 (USD1.2036)

Gold: up at USD1,783.15 per ounce (USD1,774.53)

Oil (Brent): up at USD64.90 a barrel (USD63.53)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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Thursday's Key Economic Events still to come

1100 GMT Ireland consumer price index

1600 CET EU flash consumer confidence indicator

0830 EST US import & export price indices

0830 EST US housing starts and building permits

0830 EST US jobless claims

1030 EST US EIA weekly natural gas storage report

1100 EST US EIA weekly petroleum status report

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UK Prime Minister Boris Johnson is awaiting new data on the impact of vaccines on coronavirus after stressing he will take a "cautious and prudent approach" to easing England's third national lockdown, PA reports. Johnson is understood to be expecting evidence on the impact of the UK's jabs programme on hospital admissions and deaths by the end of Friday, ahead of setting out his "road map" next week. But it was unclear whether the early data would include the impact on transmission, with the results of two key Public Health England studies potentially not ready until next month. Meanwhile, major research showed lockdown measures were significantly driving down infection levels across the nation, but that they remained high and at similar levels to those observed in late September. Imperial College London's React study, which tested more than 85,000 people in England between February 4 and 13, suggested infections had dropped to just one in 200 people. The study suggested infections were halving every 15 days, and the R number – which expresses how many people the average infected individual spreads the virus to – is at 0.72.

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UK Justice Secretary Robert Buckland has suggested that employers may be able to draw up contracts requiring new staff members to have coronavirus vaccines. The Cabinet minister said on Wednesday that it is unlikely that bosses could legally require staff to receive a jab under existing agreements, but suggested it could be tested in court. Pimlico Plumbers and Barchester Healthcare, one of the UK's largest care home groups, are among those who said they will not hire new staff who have refused jabs on non-medical grounds.

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BROKER RATING CHANGES

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GOLDMAN SACHS INITIATES ASHTEAD GROUP WITH 'BUY' - TARGET 5100 PENCE

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CITIGROUP RAISES AVIVA TO 'BUY' ('NEUTRAL') - TARGET 420 (346) PENCE

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MORGAN STANLEY RAISES SSP GROUP TO 'OVERWEIGHT' ('EQUAL-WEIGHT') - PT 350 PENCE

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COMPANIES - FTSE 100

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Medical devices maker 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.

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Royal Dutch Shell late Wednesday said it has sealed a deal to sell the Duvernay shale light oil assets in Canada to Crescent Point Energy. Toronto-listed Crescent will pay USD707 million for the assets, USD550 million in cash and USD157 million worth of shares in the company. The assets include 450,000 net acres in the Fox Creek and Rocky Mountain areas which are currently producing 30,000 barrels of oil equivalent per day.

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The head of BT Sport warned European football leagues to expect a period of "deflation" in the value of the television rights to matches, the Financial Times reported. "There's certainly going to be a rights correction and it may be seen and interpreted by many as rights deflation," Simon Green told the Financial Times Business of Football Summit on Wednesday. The newspaper noted that Europe's five biggest football leagues earned a combined EUR17 billion in revenue last season from television contracts and is preparing later this year for an auction of the rights to broadcast matches in the UK in the three seasons between 2022 and 2025. The existing UK contract, worth GBP5 billion over three years, is shared by BT Sport, part of BT Group, with Sky, part of the US's Comcast, and online retailer and streaming services provider Amazon.com, the FT said.

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NatWest Group is gearing up to gradually withdraw from the Republic of Ireland, with the aim of freeing up capital and moving completely to the UK market, the Financial Times reported. The lender - formerly known as Royal Bank of Scotland Group - is expected to announce the plans when it reports on its annual results on Friday. Its Northern Irish business will not be affected. This move follows a review of the business which began in 2020. NatWest's Ulster brand has 15% of the Irish mortgage market, nearly 20% of small and medium-sized enterprises business lending, and a loan book of about EUR20 billion. NatWest has been under pressure from Irish authorities to ensure the mortgage and business loan books are sold to active lenders to maintain competition in the market.

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COMPANIES - FTSE 250

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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.

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Hochschild Mining reported 2020 pretax profit of USD62.9 million, down from USD76.8 million in 2019, as revenue fell to USD621.8 million from USD755.7 million. The company declared a 2.335 cents final dividend. "We have delivered strong financial results in 2020, despite the impact of the Covid-19 related stoppages," said CEO Ignacio Bustamante. "Higher precious metals prices combined with strong free cashflow generation saw us finish the year in a net cash position for the first time in eight years."

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COMPANIES - GLOBAL

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Airbus posted a sharp earnings fall during a year which saw the aerospace firm's net commercial deliveries plunge by almost two-thirds as the aviation sector was battered by Covid-19. Chief Executive Officer Guillaume Faury called Covid-19 "the most challenging crisis to hit the aerospace industry". And looking ahead to 2021, commercial aircraft deliveries are expected to stay at the same level. Airbus ended 2020 with a yearly revenue fall of 19% to EUR19.75 billion from EUR24.31 billion in the three months ended December. It did however, swing to profit during the quarter. Airbus posted net income of EUR1.55 billion compared to a EUR3.55 billion net loss a year earlier. It had booked net adjustments of EUR4.91 billion in the final quarter of 2019.

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Credit Suisse reported a double-digit income fall in 2020 following a swing to loss in the final quarter of the year. The Zurich-based bank said pretax income totalled CHF3.5 billion for 2020, down 27% year-on-year. Credit Suisse said its net income attributable to shareholders decreased by 22% on the prior year to CHF2.7 billion. Net revenue of CHF22.4 billion for 2020 was flat year-on-year, while total operating expenses of CHF17.8 billion were up 2%, driven by litigation provisions and restructuring expenses. The results include a CHF88 million pretax loss made in the three months to the end of 2020, with net revenue coming in at CHF5.2 billion, down 16% year-on-year. "Looking forward into 2021 and beyond, we aim to further accelerate growth in Wealth Management and deliver sustainable returns in Investment Banking," said Chief Executive Thomas Gottstein.

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Thursday's Shareholder Meetings

Aminex PLC - EGM re replacing Crest with Euroclear Bank

Norish PLC - EGM re replacing Crest with Euroclear Bank

Ormonde Mining PLC - EGM re replacing Crest with Euroclear Bank

Oxford Metrics PLC - AGM

React Group PLC - AGM

Ridgecrest PLC - AGM

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By Tom Waite; thomaslwaite@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
SSP Group PLC 284.00 GBX 2.45 -
Aviva PLC 403.60 GBX 0.90
Barclays PLC 185.40 GBX 0.90
Ashtead Group PLC 5,870.00 GBX 0.07
Hochschild Mining PLC 137.70 GBX 0.58 -

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