TOP NEWS SUMMARY: Barclays, Santander and Deutsche Bank bounce back

(Alliance News) - The following is a summary of top news stories Wednesday.

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COMPANIES

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Barclays kicked off the UK banking reporting season with a sharp profit hike as the lender's bottom line was boosted by a release of credit impairment provisions. Barclays also announced plans for a GBP500 million buyback, adding to the GBP700 million it returned to shareholders through a share repurchase programme it completed in April. Pretax profit in the six months to June 30 more than tripled to GBP4.98 billion from GBP1.27 billion a year earlier. Net operating income jumped 53% to GBP12.06 billion from GBP7.88 billion. The bank benefited from a GBP742 million credit impairment release, compared to a charge of GBP3.74 billion a year earlier. Chief Executive James Staley labelled it a "strong first half".

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Banco Santander swung to profit in the first half of 2021, thanks to improved lending volumes, it said. The Madrid-based lender reported pretax profit of EUR6.91 billion in the first half of 2021. This compares to a pretax loss of EUR6.41 billion in the same period last year, when the bank made a non-cash adjustment to the valuation of goodwill. Santander said its strong performance was driven by good volume growth, with loans increasing 2% and deposits 4%. Total income in the first six months of 2021 grew by 1.9% year-on-year to EUR22.70 billion, with growth in all regions and countries, except Mexico. Net fee income rose 1% year-on-year to EUR5.17 billion.

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Deutsche Bank said earnings grew in the first half of 2021 despite a revenue slip in the second quarter. The Frankfurt-based lender said pretax profit for the three months ended June 30 totalled EUR1.2 billion versus just EUR158 million in the second quarter of 2020. Provision for credit losses were EUR75 million in the quarter, chopped from EUR761 million in the second quarter of 2020. Total non-interest expenses, meanwhile, were slimmed to EUR5.0 billion from EUR5.4 billion year-on-year. The improvement in pretax profit came despite a negative impact of EUR226 million from the ruling by the German Federal Court of Justice in April 2021 requiring active customer consent for pricing changes on current accounts. Deutsche Bank reported net revenue of EUR6.2 billion for the second quarter of 2021, down 1% year-on-year.

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St James's Place said its funds under management climbed 11% to a record GBP143.77 billion on June 30 from GBP129.34 billion at the end of last year. Annually, it was up 24%. Gross inflows jumped 27% year-on-year to GBP9.19 billion from GBP7.26 billion. What's more, the FTSE 100 wealth manager swung to a pretax profit of GBP482.6 million from a GBP71.9 million loss a year earlier. St James's Place declared an 11.55p per share first half payout, in line with its plan for interim dividends to amount to 30% of the prior year's total dividend. It did not make a payout in the first half of 2020. CEO Andrew Croft commented: "Although there remains inherent uncertainty in the operating environment as the UK and the world at large continues to navigate the pandemic, the results we have announced today show we have made an encouraging start against our 2025 ambitions." The company eyes GBP200 billion in funds under management by 2025.

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Japan's M3 said earnings jumped in the first quarter of its current financial year amid strong demand. The Tokyo-based healthcare services platform provider said sales for the three months to June 30 rose by 31% year-on-year to JPY35.48 billion, about USD322.6 million. Pretax profit, meanwhile, more than doubled to JPY11.22 billion from JPY24.76 billion the year prior. M3 said it has seen continued healthy demand from pharma sector for the services on its physician platform, while Covid-related demand decreased amid recovery.

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British American Tobacco reported an underwhelming first-half performance as the London-based cigarette maker shifts its focus away from conventional smoking products. Pretax profit in the first half of the year fell 4.6% to GBP4.38 billion from GBP4.59 billion a year prior. Revenue dipped 0.7% to GBP12.18 billion from GBP12.27 billion. Chief Executive Jack Bowles said that rapid growth in New Categories is driving "significant scale benefits".

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BASF said its earnings surged in the second quarter of 2021 and it expects this positive momentum to continue going forward. The German chemicals company reported a sales increase of 56% in the three months to June 30 to EUR19.8 billion. This sales growth was largely attributable to higher prices and volumes in all segments. Price levels in the Surface Technologies, Chemicals and Materials segments in particular increased, while volumes grew primarily in the Surface Technologies, Materials and Industrial Solutions segments.

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ITV posted a sharp profit hike in the six months to June 30. Pretax profit soared to GBP133 million from just GBP15 million a year before. Revenue came in 27% higher at GBP1.55 billion from GBP1.22 billion. "Our H1 results demonstrate that ITV is emerging from the worst effects of the pandemic. We've continued to implement our key strategic priorities and have further strengthened the business," CEO Carolyn McCall said. Like the first half of 2020, ITV decided against declaring a payout. However, it announced plans to resume dividends with a 3.3p final payout for 2021. McCall added: "We intend to re-commence a progressive dividend policy based on a notional [annual] dividend of 5p per share which we expect to grow over time." ITV said it is on track to deliver GBP30 million in permanent cost savings this year.

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Anglo American said its diamond business, De Beers Group, saw continued "good" demand for rough diamonds, driven by a strong market for diamond jewellery in the US and China. Rough diamond sales value for the provisional sixth sales cycle, which covers the period between July 12 to July 27, rose 6.9% to USD510 million from USD477 million in the fifth sales cycle. In the 2020 sixth sales cycle, De Beers recorded USD116 million in rough diamond sales. De Beers Chief Executive Bruce Cleaver said the sixth sales cycle of the year had seen the continuation of good demand for rough diamonds, driven by strong demand for diamond jewellery in the key US and China consumer markets. "With the ongoing strength in consumer sales of diamond jewellery, the outlook remains positive for the second half of the year, subject to the risks that the pandemic continues to present across the globe," Cleaver said.

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Smurfit Kappa Group reported 11% revenue growth for the first half of 2021, with the paper packaging maker acquiring a 600,000 tonne recycling centre in Italy. The Dublin-based firm's statutory pretax profit for the six months ended June 30 was EUR413 million, rising from EUR383 million in the same period a year prior. Revenue was up 11% at EUR4.68 billion from EUR4.20 billion in the first half of 2020. Smurfit also said it has bought Verzuolo mill - a 600,000 tonne capable recycling facility - in northern Italy for EUR360 million as part of its investment programme. It also announced the purchase of businesses in Peru and Mexico.

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Apple notched a third quarter record for revenue as iPhone sales jumped, with profit for the period nearly doubling. Total revenue for the three months to June 26 jumped 36% to USD81.43 billion from USD59.69 billion a year ago. Of this, product sales made up USD63.95 billion and services comprised the remaining USD17.49 billion. Net income nearly doubled, up 93% to USD21.74 billion from USD11.25 billion a year prior, and diluted earnings per share soared to USD1.30 from USD0.65. "Our record June quarter operating performance included new revenue records in each of our geographic segments, double-digit growth in each of our product categories, and a new all-time high for our installed base of active devices," said Chief Financial Officer Luca Maestri. By product category, iPhone sales showed the strongest growth, jumping 50% to USD39.57 billion from USD26.42 billion a year ago. Mac sales rose 16%, iPad sales were up 12%, Wearables, Home & Accessories rose 36% and Services grew 33%.

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Microsoft reported a booming fourth quarter, with cloud services the standout performer, but the firm's shares took a hit after the closing bell in New York on Tuesday. In the three months to three months to June 30, the Redmond, Washington-headquartered computer software, consumer electronics and personal computers firm recorded net income of USD16.46 billion, up sharply from USD11.20 billion a year earlier. Diluted earnings per share jumped to USD2.17 from USD1.46. Revenue increased 21% to USD46.15 billion from USD38.03 billion. Revenue in Intelligent Cloud was USD17.4 billion in the final quarter, a 30% increase year on year. Server products and cloud services revenue increased 34% driven by Azure revenue growth of 51%.

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Alphabet reported a surge in quarterly revenue and profit, reflecting "elevated consumer online activity" in the period. Shares in Alphabet closed down 1.6% at 2,638.00 in New York on Tuesday, but advanced 4.4% after-hours. For the quarter ended June 30, revenue surged 62% to USD61.88 billion from USD38.30 billion a year ago. This increase was driven by Google advertising revenue rising 69% to USD50.44 billion from USD29.87 billion. YouTube ads revenue nearly doubled to USD7.00 billion from USD3.81 billion. "Our strong second quarter revenues of USD61.9 billion reflect elevated consumer online activity and broad-based strength in advertiser spend. Again, we benefited from excellent execution across the board by our teams," said Chief Financial Officer Ruth Porat.

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Visa reported profit growth in its third quarter as economies across the globe began to bounce back from the pandemic. Net revenue for the third quarter which ended June 30 rose 27% year-on-year to USD6.13 billion. Payments volume was up 34% in the quarter on a constant currency basis, the firm noted, and processed transactions rose 39%. Net income rose 9% to USD2.58 billion and earnings per share increased 10% to USD1.18. "Visa delivered another strong quarter as many key economies are well into a reopening-driven recovery. This was best demonstrated by credit and face-to-face spending bouncing back while debit and eCommerce volumes remained robust from accelerated cash digitization sparked by the pandemic," said Chair & Chief Executive Alfred Kelly Jr.

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Starbucks third quarter net earnings were USD1.15 billion versus USD678.4 million loss year before. Diluted earnings per share USD0.97 from USD0.58 loss per share year before. Total revenue in three months to June 27 surges to record USD7.50 billion from USD4.22 billion in three months to June 28 year before. "Starbucks delivered record performance in the third quarter, demonstrating powerful momentum beyond recovery," Chief Executive Kevin Johnson says. For financial 2021, revenue guided between USD29.1 billion and USD29.3 billion, with GAAP EPS to be between USD2.97 and USD3.02. Expects 2,150 new store openings.

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MARKETS

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European stock markets shrugged off a mostly lower close in Asia to trade higher on Wednesday, as investors reviewed company earnings reports ahead of the day's main event, the US Federal Reserve policy announcement, due at 1400 Washington time. European banks were following US peers in reporting second-quarter earnings. Barclays was up 3.7% in London, Banco Santander down 0.9% in Madrid, and Deutsche Bank up 0.5% in Frankfurt. Due at midday London time are second-quarter results for pharmaceutical firm GlaxoSmithKline.

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CAC 40: up 0.9% at 6,589.74

DAX 30: up 0.3% at 15,566.48

FTSE 100: up 0.2% at 7,010.35

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Hang Seng: closed up 1.5% at 25,473.88

Nikkei 225: closed down 1.4% at 27,581.66

S&P/ASX 200: closed down 0.7% at 7,379.30

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DJIA: called marginally higher, up 1.00 point

S&P 500: called up 0.2%

Nasdaq Composite: called up 0.2%

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EUR: down at USD1.1818 (USD1.1834)

GBP: flat at USD1.3880 (USD1.3882)

USD: down at JPY109.55 (JPY109.66)

Gold: down at USD1,799.63 per ounce (USD1,802.67)

Oil (Brent): up at USD75.07 a barrel (USD74.58)

(currency and commodities changes since previous London equities close)

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ECONOMICS AND GENERAL

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German and French consumer confidence took a step back in July, GfK and Insee reported. Consumers in Germany had moderately lower economic and income expectations in July, while the propensity to buy increased slightly. After climbing to a ten-year high in June, economic expectations were somewhat more moderate in July. The indicator slipped 3.8 points to 54.6 points. "Despite the current stagnation of consumer confidence, the domestic economy will make a positive contribution to overall economic development in the second half of the year. Consumers with full wallets will also ensure that this happens," noted Rolf Burkl, a GfK consumer expert. The GfK consumer climate study found that consumers continue to view the German economy as being on the upswing. Turning to France, the number of consumers considering now to be a suitable time to make major purchases decreased markedly in July, after a sharp increase in June. In addition, the number of French consumers considering now a good time to save has fallen for the third consecutive month.

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UK house prices fell in July, according to figures from Nationwide, as a recent tapering of stamp duty relief cooled the busy property market. According to the building society, the UK's largest, house prices fell 0.5% monthly in July to GBP244,229 from GBP245,432. This followed a 0.7% rise in June. Annually, prices were 11% higher in July, following June's 13% hike. Nationwide Chief Economist Robert Gardner said: "The modest fall-back in July was unsurprising given the significant gains recorded in recent months. The tapering of stamp duty relief in England is also likely to have taken some of the heat out of the market."

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The European Commission has paused legal action against the UK over the implementation of the post-Brexit deal on Northern Ireland, in the hope that solutions to outstanding issues can be found. Brexit minister Frost has demanded that significant changes are made to the Northern Ireland Protocol, an element of the deal he negotiated, as he said "we cannot go on as we are". He called for a "standstill" period, preserving the current grace periods and suspending legal action taken by the EU against the UK while changes are negotiated. A European Commission spokeswoman said on Tuesday that the legal action pause would be used to consider proposals put forward by the UK last week.

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England is expected to open its borders to allow US and EU travellers who are fully vaccinated against coronavirus to enter without the need to quarantine, according to reports. The plans, which would be a boost to the aviation and tourism sectors, are expected to be discussed by ministers on Wednesday, The Guardian and The Times reported. The Guardian added that conversations are also expected between Whitehall officials and the devolved administrations on whether the change would apply to England only, or all four nations of the UK. The changes are expected as soon as next week, while countries outside the EU and US could be allowed inbound quarantine-free travel at a later date, The Times added.

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People vaccinated against Covid-19 in high-risk parts of the US should resume wearing masks indoors, the top health authority said Tuesday, a major shift in coronavirus guidance that underscores the country's struggle to suppress the Delta variant. President Joe Biden said the announcement showed that America needs to "do better" on vaccinations, adding that a mandate for the country's more than two million federal workers was now "under consideration." Centers for Disease Control and Prevention director Rochelle Walensky relayed the mask decision in a press call, citing new data that shows that while vaccines remain highly effective, rare breakthrough cases involving Delta have an increased risk of onward transmission. "In areas with substantial and high transmission, CDC recommends fully vaccinated people wear masks in public indoor settings," she said.

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Millions of Sydney residents will spend another month in lockdown, authorities announced Wednesday, citing a still-fast-growing coronavirus outbreak and stubbornly low vaccination rates. Australia's biggest city had been due to exit five weeks of lockdown on July 30, but the restrictions will now remain in place until August 28 as case numbers continued to climb. Officials announced 177 new cases linked to the Sydney outbreak, which began mid-June when a driver for an international flight crew contracted the virus.

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Consumer prices in Australia increased in the second quarter of 2021, according to the latest data from the Australian Bureau of Statistics. The consumer price index for the quarter to the end of June rose 0.8%, driven by a 6.5% rise in automotive fuel. "A resurgence in global demand for oil saw fuel prices rebound to above pre-Covid March 2020 quarter levels in the June 2021 quarter," ABS said. Annual consumer price index increased 3.8% in the quarter to the end of June, due to some base effects following the introduction of free child care and a record fall in fuel prices over the period. The trimmed mean annual inflation - which measures underlying inflation and excludes large, one-off price impacts - was 1.6%, increasing from 1.1% in the March quarter.

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By Tom Waite; thomaslwaite@alliancenews.com

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