Proactive Investors -
- FTSE 100 down 2 points at 7,388
- Lloyds Bank profits beat forecast, holds guidance
- Reckitt has room to "sharpen and improve," says CEO
No surprises in Lloyds' results as cash pile builds up
Reaction to the Lloyds Banking Group (LON:LLOY) results is broadly positive with some relief after the numbers from Barclays (LON:BARC) on Tuesday.
Shares are moving either side of opening levels in early trading, down 0.4%, at 40.39p for now.
Jefferies noted the results were “characterised by a large impairment beat, broadly in-line net interest income, better non-interest income and better cost performance.”
The broker pointed out all guidance was held, notably the greater than 310bps full year 2023 net interest margin (NIM) forecast, with the credit cost ratio modestly improved.
It was disappointed the company stuck to what it called its “stale” buy-back policy with no announcement alongside its results today.
Jefferies points out Lloyds is sitting on £2.5 billion of capital in excess of its 13.5% target.
The lack of a buy-back is in stark contrast to moves by Deutsche Bank (ETR:DBKGn) today, which has announced plans to accelerate the payouts it makes to its shareholders, sending shares up 6.3%
Gary Greenwood at Shore Capital said the profit performance was a touch ahead of consensus expectations, primarily due to a lower than anticipated impairment charge.
“Although NIM was slightly lower than consensus expected, the market should take some comfort that guidance is unchanged, following yesterday’s downgrade by Barclays,” he thinks.
Richard Hunter, head of markets at interactive investor, believes “Lloyds is making a good fist of performing within a difficult environment, with its underlying financial strength underpinning progress.”
Although NIM fell in the third quarter, Lloyds has retained its guidance on the outlook for the year at 3.1%, which suggests that “some stability has returned,” he thinks.
But although the group has backed its full-year guidance, “pockets of doubt remain.”
“As with its competitors, there has been a limited exodus as savers chase higher rates elsewhere in an increased interest rate environment,” he pointed out.
Zoe Gillespie, investment manager at RBC Brewin Dolphin, felt that after Barclays’ mixed set of results saw a sell-off of banks yesterday, Lloyds’ update should provide “some reassurance about the sector’s resilience.”
“There are no surprises in today’s update, which should assuage the market, and Lloyds appears to be holding onto cash for any opportunities that emerge in the coming months,” she said.
FTSE flat, Lloyds recovers early falls
The FTSE 100 remains in negative territory although losses are modest, down 7 points at 7,383.
Lloyds Banking Group is now just in the green after its better-than-expected profit and fall in bad debts.
Jefferies said the results were “characterised by a large impairment beat, broadly in-line net interest income, better non-interest income and better cost performance.”
“We were disappointed the company has stuck to its stale full year buyback policy,” it added.
The broker had hoped the lender would break its buy-back policy and bring forward an announcement from the end of the financial year.
Belluscura PLC (LON:BELLB) rose 1.3% after it said TMT has completed due diligence and would be in a place to make a firm offer shortly.
The terms have been revised and will now comprise the issuance of 3 new ordinary shares of Belluscura in exchange for every 4 ordinary shares of TMT Acquisition.
Elsewhere, XP Power is up 2.6% as Berenberg upgrades to buy from hold although it has slashed its price target to 1,400p from 2,300p.
FTSE edges lower, Lloyds and Reckitt ease
The FTSE 100 edged lower in opening exchanges with solid results from Lloyds Banking Group PLC failing to inspire investors.
At 8:15am, London's lead index was down 8.91 points, 0.1%, at 7,380.79 while the FTSE 250 fell 66.16 points, 0.4%, at 16,927.94.
Lloyds shares fell 1.6% despite better-than-expected third quarter profits and a drop in bad debts.
Net interest margin did fall in the quarter but the high street lender backed its full-year guidance, unlike UK rival Barclays yesterday.
Zoe Gillespie, investment manager at RBC Brewin Dolphin, said: “After Barclays’ mixed set of results saw a sell-off of banks yesterday, Lloyds’ update should provide some reassurance about the sector’s resilience.”
“The group’s performance is in line with expectations, its loan book appears to be relatively stable despite the economic backdrop, and its guidance for the year remains unchanged.”
For now, the market is taking a dimmer view of the update which has pulled Barclays down by a further 1.3%.
Reckitt Benckiser is down 2.3% as new CEO Kris Licht attempts to make his mark on the business unveiling a new share buy-back alongside financial aspirations.
The consumer goods firm also said it was on target to hit full-year expectations.
Mondi (LON:MNDI) is down 1.8% after Barclays downgraded to underweight from equal weight while Experian steadied after its 10% fall yesterday following the warning from TransUnion.
Essentra is the big loser, down 11.3% at 130.95p, after its update.
Liberum said: “Europe is weakening, while the US remains difficult and the APAC recovery is gradual.”
“We cut our FY23E EBIT by 6%, with sales pressure mitigated by strong margin discipline.”
“The longer-term growth story is intact, with a significant opportunity to consolidate a large, fragmented market,” it thinks.
Reckitt launches new £1bn buyback as new CEO unveils hopes
Reckitt Benckiser Group PLC (LON:RKT) launched a £1 billion buy-back as new chief executive Kris Licht unveiled his hopes for the business, saying it had “room to sharpen and improve.”
The consumer goods firm, which makes Harpic, Dettol and Clearsil, reported like-for-like net revenue growth of 3.4%, to £3.6 billion, in the third quarer led by strong broad-based growth of 6.7% across Hygiene and Health combined.
Reported net revenue declined 3.6% with like-for-like growth offset by forex headwinds of 6.8% and a net M&A impact of 0.2%.
Licht said the firm was “firmly on track to deliver our full year targets, despite some tough prior year comparatives that we continue to face in our US Nutrition business and across our OTC portfolio in the fourth quarter."
In a separate statement, Licht announced a strategy update which included plans for “an enhanced shareholder returns programme,” starting today with the start of a £1 billion share buy-back.
He said Reckitt is a “strong, competitive, resilient business,” but does “however, have room to sharpen and improve.”
He said the firm was well placed to deliver sustainable mid-single digit like-for-like net revenue growth over the medium term and sees “a clear runway for sustainable growth, with superior gross margins.
Reckitt will “extend our productivity programme to focus on fixed costs to fuel both growth and earnings.”
It said it is well positioned to grow adjusted operating profit ahead of net revenue in the medium term.