LONDON BRIEFING: NatWest promises GBP3 billion distributions in 2021

(Alliance News) - NatWest Group on Friday posted a swing to first half profit, helped by an ...

Alliance News 30 July, 2021 | 8:24AM
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(Alliance News) - NatWest Group on Friday posted a swing to first half profit, helped by an impairment release.

The Edinburgh-based bank 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. Its CET1 ratio is 18.2%, flat on the first quarter.

Despite its largess toward shareholders, NatWest shares were down 1.2% early 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 0.9% at 7,017.76

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Hang Seng: down 1.3% at 25,978.04

Nikkei 225: closed down 1.8% at 27,283.59

DJIA: closed up 153.60 points, or 0.4%, at 35,084.53

S&P 500: closed up 0.4% at 4,419.15

Nasdaq Composite: closed up 0.1% at 14,778.26

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EUR: flat at USD1.1888 (USD1.1885)

GBP: down at USD1.3952 (USD1.3967)

USD: firm at JPY109.59 (JPY109.54)

GOLD: down at USD1,828.48 per ounce (USD1,829.48)

OIL (Brent): firm at USD74.58 a barrel (USD75.51)

(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

1000 CEST Germany gross domestic product - 1st release

1100 CEST EU unemployment

1100 CEST EU flash estimate euro area inflation

1100 CEST EU preliminary flash estimate GDP

1800 CEST EU bank stress test results published

0830 EDT US personal income & outlays

0830 EDT US employment cost index

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The UK's retail vacancy rate increased in the second quarter of 2021, with shopping centres hit hardest by Covid-19 lockdown measures. According to the British Retail Consortium-Local Data Co monitor, the retail vacancy rate rose to 14.5% in the second quarter, from 14.1% in the first three months of 2021. Shopping centre vacancies rose to 19.4% from 18.4%, while high street vacancies tracked the overall rate, rising to 14.5% from 14.1%. In retail parks, the vacancy rate increased to 11.5% from 10.6%. "It comes as no surprise that the number of shuttered stores in the UK continues to rise, after retailers have been in and out of lockdown for over a year. While vacancy rates are rising across all retail locations, it is shopping centres, with a high proportion of fashion retailers, that have been the hardest hit by the pandemic," BRC Chief Executive Helen Dickinson said. "Almost one in five shopping centre units now lie empty, and more than one in eight units have been empty for more than a year. Retail parks have also been impacted from the loss of anchor stores and their vacancy rate is rising quickly."

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BROKER RATING CHANGES

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CREDIT SUISSE RAISES NEXT PLC TO 'NEUTRAL' ('UNDERPERFORM') TARGET 8,025 (7,150) PENCE

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BARCLAYS RAISES CRODA TO 'EQUAL WEIGHT' (UNDERWEIGHT) - PRICE TARGET 8,400 (6,000) PENCE

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COMPANIES - FTSE 100

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International Consolidated Airlines 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. IAG'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. The group - 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."

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Education publisher Pearson booked just GBP4 million in pretax profit in the first half of 2021, down from GBP35 million a year before. Sales rose 7.0% to GBP1.60 billion from GBP1.49 billion, but a GBP181 million other net gain a year before turned into a GBP6 million loss this year. However, Pearson swung to GBP127 million in adjusted operating profit from a GBP23 million such loss a year before. Chief Executive Andy Bird said the company made "good strategic, operational and financial progress in the first half of 2021 leading to healthy revenue and profit growth in the period". He said Pearson is on track to meet current market expectations.

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Rightmove nearly doubled profit compared to last year's challenging performance during the height of Covid-19, but it has yet to fully recover to its pre-pandemic levels. The online property business said that pretax profit soared from less than GBP62 million to nearly GBP115 million in the first six months of this year. The business is still around 15% behind its 2019 profit, which was unaffected by Covid. Using other measures, Rightmove is doing better. It has grown revenue by 4% compared to 2019, and operating profit rose 6%. The business paid out no interim dividend last year. It has now promised shareholders 3p per share, up from 2.8p two years ago.

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COMPANIES - FTSE 250

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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.

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The private equity-backed consortium seeking to buy Wm Morrison Supermarkets said the UK competition regulator has not raised any issues regarding its GBP6.3 billion takeover deal. The consortium, led by Softbank Group's Fortress, has said the Competition & Markets Authority told the bidder it "has no further questions" regarding the offer. In a statement to the stock market, it added that the CMA has "not opened an inquiry or indicated in writing that it is still investigating whether to open an inquiry".

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COMPANIES - GLOBAL

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UniCredit reported a "robust" first-half performance after a strong second quarter as it enters talks to acquire parts of Banca Monte dei Paschi di Siena. The Milan-based bank reported net profit EUR1.03 billion for the recent quarter that ended June 30, more than doubled from EUR420 million a year before and up 17% from EUR887 million in the first quarter. Underlying net profit of EUR1.10 billion also was doubled from EUR528 million a year before and up 25% from EUR883 million in first quarter. Total revenue reached EUR4.40 billion in the second quarter, up 5.5% from EUR4.17 billion a year before, though down 6.1% from EUR4.69 billion in the first quarter. UniCredit had said late Thursday it has entered exclusive discussions to acquire parts of the Italian-bank MPS. In 2016, MPS was bailed out by the Italian government, who is now the majority shareholder. UniCredit said the Italian government's Ministry of Economy & Finance has approved the prerequisites for a potential transaction involving the commercial operations of MPS, within carefully defined perimeters and appropriate risk mitigation.

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Friday's Shareholder Meetings

Castillo Copper Ltd - EGM re issue of shares

Danakali Ltd - AGM

DP Poland PLC - AGM

Edenville Energy PLC - AGM

Puma VCT 13 PLC - AGM

RTW Venture Fund Ltd - EGM re transfer to Premium Segment from Specialist Fund Segment

Sirius Real Estate Ltd - AGM

St James House PLC - AGM re name change to Tintra PLC

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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
Croda International PLC 8,486.00 GBX -4.00
Morrison (Wm) Supermarkets PLC 292.10 GBX -0.03
Pearson PLC 701.20 GBX -0.40
Next PLC 8,194.00 GBX 0.20 -
Rightmove PLC 693.00 GBX -3.59 -
NatWest Group PLC 220.70 GBX 1.42
SoftBank Group Corp 6,624.00 JPY -0.05

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