The UK stock market had a tough week this week, as the spectre of Covid-19 is rising again and local lockdowns are extending. By midday Friday, the FTSE 100 stood at 5,574 points, down 4.9% on the week. The prospect of London’s top index ending the year above 6,000 points is looking increasingly remote.
Banks were in the news this week, releasing third-quarter updates that beat analysts’ expectations. HSBC Holdings was first on Tuesday, posting a $3.1bn pre-tax profit, with an adjusted figure of $4.3bn.
Lloyds Banking Group and NatWest Group both reported returns to profit, on Thursday and Friday respectively. For Lloyds, pre-tax profit came in at £1bn, more than twice the figure expected by analysts. NatWest, meanwhile, recorded an operating profit of £355m, where the City had been expecting another quarterly loss.
All three reported decent liquidity, with comfortable CET1 ratios and impairments below expectations. The stock market responded unenthusiastically and shares across the sector didn’t move much.
Oil and telecoms
It wasn’t just banks that reported returns to profit this week, as BP did the same. BP is in the midst of possibly the biggest upheaval in its history, as it retargets itself at renewable energy and aims to reach net zero status by 2050. Against that background, an adjusted Q3 profit of $86m didn’t impress, especially when compared to $2,254m for Q3 2019. With a forecast 2021 yield of 9%, BP’s dividend is among the stock market’s biggest.
On the subject of dividends, this year Royal Dutch Shell ended its run of never having cut its dividend since World War II. And though the Q3 dividend is up a bit at 17c, it’s still way down on 2019’s 47c. Adjusted earnings, reported Thursday, beat the Q2 figure at $955m. But we need to contrast that with last year’s $4.77bn.
BT Group, whose shares are down nearly 50% in the stock market crash, saw its shares blip upwards Thursday. First-half results provided the drive, though revenue was down 8% with pre-tax profit falling 20%. But there was optimism for the future, as the telecoms giant lifted its full-year earnings guidance and spoke of “sustainable growth” going forward.
Stock market beater
Next, meanwhile, gave us some idea of how fashion retail is going with a Q3 update Wednesday. Full-price sales in the quarter were up 2.8% on last year, with total sales up 1.4%. The nine-month period was tougher, with full-price sales down 20%, mind. The company has lifted its full-year guidance, and now expects profit to reach £365m, which is £65m better than September’s hopes. Year-end debt should fall by £487m to £625m. Next’s online channels helped its sales, though, and others in the sector won’t be doing so well.
Pharmaceuticals companies are popular now, for obvious reasons, but GlaxoSmithKline shares are not weathering the stock market crash well. They’re down 27% so far in 2020, and weren’t helped by Wednesday’s report of a 3% decline in Q3 revenue to £8.6bn. That was below analyst expectations, though adjusted EPS did beat predictions at 35.6p per share. On the current share price, Glaxo offers a forecast 6.2% dividend yield.
