Proactive Investors -
- FTSE 100 falls back after steady start, down 36 points
- Persimmon rises on green shoots despite fall in new home completions
- StanChart results top expectations, but banks weaken on US nerves
Footsie slips back
Equities have fallen back after a resilient start with the FTSE 100 now down 36 points reflecting the falls in the US.
US stocks fell as nerves in the banking sector resurfaced after shares in First Republic (NYSE:FRC) slumped 49% on Tuesday, while a number of disappointing corporate updates and weak consumer confidence figures raised fears as to the health of the US economy.
Susannah Streeter, head of money and markets, Hargreaves Lansdown said: “Realisation is dawning that more ominous clouds are gathering over the US economy, causing fresh nervousness for investors. Despite some better-than-expected results from the first of the big tech crowd to report, the darkening picture of consumer confidence has increased concerns about lower spending ahead.”
In timely fashion one of the Footsie’s largest banks gave its take on the banking crisis reporting it had not seen volume impact from the recent banking stress.
Streeter commented: “Given the turmoil we’ve seen in the banking sector over recent weeks, even in the last 24 hours with First Republic’s woes so front of minds, it’s a breath of fresh air to see Standard Chartered (LON:STAN) surpass earnings expectations and post a pretty upbeat outlook.”
Shares in the Asian-focused bank held around opening levels falling from early highs while other banks failed to hold onto their opening gains.
But Lloyds (LON:LLOY), Barclays (LON:BARC), and NatWest (LON:NWG) all slipped after making a bright start to the day.
In Europe, there were no obvious signs of distress in the financial sector. Deutsche Bank (ETR:DBKGn) fell 0.4%, while the French banks BNP Paribas (EPA:BNPP) and Societe Generale (EPA:SOGN) posted modest gains.
Elsewhere, housebuilders were performing well after Persimmon (LON:PSN) made some cautiously positive noises about trading.
Shares rose 3.3% making it the best performer in the index dragging others in the sector such as Taylor Wimpey (LON:TW) and Barratt Developments (LON:BDEV) higher.
But shares in CRH (LON:CRH) fell 4%. The building materials giant said it expects sales, earnings, and margins to rise in the first half after a particularly strong start to the year in the United States, though the European backdrop remains challenging.
The firm which is in the process of moving its primary stock listing to the US said a more challenging backdrop in Europe is being driven by continued inflationary pressures and some slowdown in the new-build residential sector.
Associated British Foods PLC (LON:ABF) extended its falls after yesterday's trading update with shares down a further 3.8%.
GSK beats expectations, Shingrix sales strong
GSK (LON:GSK) also beat expectations for its first-quarter revenue and profit, helped by sales of its blockbuster shingles vaccine Shingrix.
The London-listed drugmaker reported adjusted profit of 37p per share on revenue of around £7bn ahead of City forecasts of 33.2p and £6.5bn respectively, according to company-compiled consensus estimates.
The company's shingles vaccine, Shingrix, generated £833mln, ahead of than the GSK-compiled consensus of £829mln.
GSK reaffirmed its guidance for 2023.
StanChart tops forecasts, plans to return US$5bn by 2024
Standard Chartered reported better-than-expected first-quarter pre-tax profit as higher interest rates and increased trading income boosted the Asian-focused lender.
Statutory pre-tax profit of US$1.8bn were 25% higher than a year before and above City expectations of US$1.4 billion while underlying profit also advanced 25% to US$1.7 billion.
The bank’s performance “continues to improve . . . and has been achieved in what continues to be an uncertain environment,” chief executive Bill Winters said. “We remain optimistic about our continued strong performance”.
The upbeat mood was shown in plans by the bank to return in excess of US$5bn to shareholders by 2024.
Operating income improved 8% to US$4.4 billion while the net interest margin climbed 5 basis points to 1.63% from the previous quarter with the benefit from rising interest rates partly offset by increased hedge losses and adverse liability and asset mix.
Deposit balances stable in the quarter and deposit migration and betas performing as expected, the bank said.
Standard Chartered said the balance sheet remains strong, liquid, and well-diversified.
Customer loans and advances fell down 3% to US$301bn in the quarter but it said customer deposits were stable and there had been no volume impact from the recent banking stress.
The CET1 ratio of 13.7% was towards the top of the 13-14% target range.
“Our liquidity profile remains strong, with deposit balances stable and deposit migration and betas performing as expected. We continue to actively manage our credit portfolio and closely monitor sovereign risks in markets that are most vulnerable. Capital levels remain robust,” the bank said.
Looking ahead and the bank forecast income for the financial year to increase by around 10%, the top end of the 8-10% range in 2023 and in the 8-10% range in 2024.
A full year average NIM of around 170bps in 2023 and around 175bps in 2024 while the return on total equity is seen approaching 10% in 2023, and to more than 11% in 2024, with further growth thereafter.
The company took a bad debt charge of US$26mln, down US$172mln on the previous year.
Solid revenue growth at Smith & Nephew
Smith & Nephew (LON:SN) reported strong growth in its Sports Medicine and Advanced Wound Management businesses underpinned solid growth in first-quarter revenue.
The Watford-based medical equipment manufacturing company said revenue in the quarter to March 31 rose 3.8% on a reported basis to US$1.36 billion from US$1.31 billion or 6.9% on an underlying basis.
Smith & Nephew said underlying revenue in Sports Medicine & ENT rose 10.0%, in Advanced Wound Management by 7.9%, and in Orthopaedics by 3.9%.
Established Markets revenue improved 10.0% on an underlying basis as procedure volumes strengthened, offsetting Emerging Markets, where revenue was down 7.3% due to the expected impact in China from volume-based procurement and COVID.
The firm left its financial year 2023 guidance unchanged, underpinned by ongoing delivery of its 12-Point Plan.
The company is targeting 5.0% to 6.0% underlying revenue growth and a trading profit margin of at least 17.5%.
New home completions tumble 42% at Persimmon
Persimmon reported a 42% fall in new home completions in the first quarter but said there were some signs of encouragement.
The FTSE 100-listed housebuilder said in recent weeks visitor numbers are up, cancellation levels are normalising and sales rates continue the steady improvement evident since the start of the year.
“If sales rates continue at the levels seen year to date, we would expect full year 2023 volumes to be toward the top end of the previously indicated range of 8,000 to 9,000 completions,” the company said.
But Persimmon cautioned: “ As outlined at our 2022 full year results, lower completions and build cost inflation outstripping the more modest increase in ASP are, as expected, having a significant impact on the Group's profit margins this year.”
It also said sales to first-time buyers “remain more challenging, reflecting stretched affordability and reduced mortgage availability at higher loan-to-values.”
New home completions totalled 1,136 in the quarter to March reflecting the challenging market conditions in the fourth quarter and the consequent lower forward order book.
Net private sales per outlet fell to 0.62 from 0.98 a year prior but above 0.30 posted in the fourth quarter.
Overall pricing remained firm in the first quarter, with the group's private average selling price on completions up 10% on the first quarter of 2022 2022 and up 4% on the previous quarter.
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