LONDON MARKET PRE-OPEN: NatWest sets buyback; IAG trims interim loss

(Alliance News) - Stock prices in London are seen opening lower on Friday, pulling back from ...

Alliance News 30 July, 2021 | 7:59AM
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(Alliance News) - Stock prices in London are seen opening lower on Friday, pulling back from strong gains on Thursday and potentially giving up all weekly progress, though the latest slate of UK corporate earnings saw improved fortunes for lender NatWest, as it joined peer Barclays in announcing a stock buyback plan.

IG futures indicate the FTSE 100 index is to open 53.5 points, 0.8%, lower at 7,024.92. The blue-chip index closed up 0.9%, or 61.79 points at 7,078.42 on Thursday. For the week, the large-cap index has so far gained 0.7%.

NatWest posted a swing to first half profit, helped by an impairment release. IAG trimmed its first half loss despite revenue in the six months to June falling. The British Airways parent said second quarter revenue jumped by more than three-quarters, however.

Among mid-caps, Cineworld said it has boosted its liquidity with incremental loans, as trading improves post-reopening.

NatWest posted total income of GBP5.32 billion in the first half of 2021, down 8.9% from GBP5.84 billion a year earlier. It swung to a pretax profit of GBP2.51 billion from a GBP770 million loss a year earlier.

Profit was boosted by a net impairment release of GBP707 million, contrasting with a hit of GBP2.86 billion taken a year earlier.

"While we see the potential for a more rapid recovery, we will continue to take an appropriate and conservative approach as the government schemes wind down and the economy reopens," Chief Executive Alison Rose commented.

NatWest declared a 3 pence per share payout and also unveiled plans to buyback GBP750 million worth of shares in the second half of 2021.

The shareholders returns do not stop there.

The company added: "NatWest Group now aims to distribute a minimum of GBP1 billion per annum from 2021 to 2023, via a combination of ordinary and special dividends." This means total shareholder distributions for 2021 will be a minimum of GBP2.9 billion, it said.

NatWest largely retained annual guidance, though it now expects a net impairment release for all of 2021 and tipped risk-weighted assets to come in below its previous GBP185 billion and GBP195 billion range.

IAG posted first half revenue of EUR2.21 billion, down 58% annually from EUR5.29 billion. In the second quarter alone, revenue jumped 77% to EUR1.24 billion from EUR703 million.

The airline group's pretax loss narrowed in the first half to EUR2.34 billion from EUR4.22 billion. In the second quarter, the carrier's loss was trimmed to EUR1.12 billion from EUR2.33 billion.

IAG - which owns British Airways and Aer Lingus as well as Spanish carriers Iberia and Vueling - said passenger capacity in the second quarter was 22% of pre-virus levels. For the third quarter, its planned capacity is 45% below 2019's levels. It is not giving financial guidance for 2021.

Chief Executive Luis Gallego commented: "In the short-term, our focus is on ensuring our operational readiness, so we have the flexibility to capitalise on an environment where there's evidence of widespread pent-up demand when travel restrictions are lifted.

"We welcome the recent announcement that fully vaccinated travellers from amber countries in the EU and the US will no longer have to quarantine upon arrival in the UK. We see this as an important first step in fully re-opening the transatlantic travel corridor."

Cineworld, which reopened all of its cinemas in June, said it has secured USD200 million in incremental loans from a group of its existing lenders. The loans mature in May 2024.

It also secured covenant amendments, cutting the minimum liquidity requirement and easing limits on the use of cash.

Along with a USD203 million US CARES Act refund, the cinema chain said it has "financial and operational flexibility" as virus curbs ease.

"Since cinemas started reopening in April 2021, trading has continued to improve, and the group is now well-positioned to benefit from pent-up customer demand and the exceptionally strong film slate through the second half of 2021," Cineworld said.

In China on Friday, the Shanghai Composite was down 0.3%, while the Hang Seng index in Hong Kong dropped 1.9%. The Nikkei 225 in Tokyo ended 1.8% lower and the S&P/ASX 200 in Sydney lost 0.3%.

Save for a promising bounce on Thursday, Asian equities have largely struggled this week, amid Chinese regulatory moves in the technology sector.

OANDA analyst Jeffrey Halley noted Asian equities shrugged off a strong showing from Wall Street, with equity prices "heading directly south" on Friday. The analyst said the Delta variant of Covid-19 may be weighing on sentiment again.

"The US CDC published some scary data about infectiousness overnight, and US daily cases rose to just shy of 100,000. Countries such as Israel, meanwhile, are offering their over 60s third Pfizer shots. A weekend delta discount is being applied in Asia today, and I don't discount the discounting continuing into the US session close," Halley added

Analysts at Berenberg however, noted that in Europe, the virus picture is a lot more promising.

"While recorded infections with the SARS-CoV-2 virus are still rising rapidly in the US, case numbers are now falling fast in the UK and the Netherlands, the two big European countries where the Delta variant had caused the worst spikes. The situation also seems to be stabilising or even improving in Spain, Portugal, Ireland and Greece," analysts at the German bank commented.

Against the yen, the dollar was trading at JPY109.60 on Friday morning UK time, up from JPY109.54 at the London equity market close on Thursday.

In New York, traders will have one eye on the US personal consumption expenditures reading, due at 1330 BST. Core PCE is the US Federal Reserve's preferred inflationary gauge. Eurozone unemployment, GDP and consumer price inflation figures are released at 1000 BST.

The euro stood at USD1.1875 early Friday, down from USD1.1885 at the European equities close Thursday. The pound fetched USD1.3939, down from USD1.3967.

Brent oil was quoted at USD75.43 a barrel early Friday, down slightly from USD75.51 at the London equities close on Thursday. Gold was trading at USD1,827.14 an ounce, down from USD1,829.48.

By Eric Cunha;

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Cineworld Group PLC 63.54 GBX 5.02 -
NatWest Group PLC 213.00 GBX 0.47
International Consolidated Airlines Group SA 149.50 GBX 4.94

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