FTSE 100 Live: Barclays and Shell fall but Centrica powers ahead

FTSE 100, Barclays lower as investment banking income falls, bad debts rise

The FTSE 100 made a subdued start to the day as investors digest a raft of UK earnings which saw some of the biggest names in the business world updating on their fortunes.

At 8.15am London’s blue-chip index was flat at 7,676.59 while the FTSE 250 jumped 72.77 points, 0.4%, to 19,259.31.

Barclays PLC (LON:BARC) fell 4% as a rise in bad debt provisions and a fall in investment banking income clouded a solid set of results which included a big hike to the dividend and a £750mln share buyback.

Bad debt provisions nearly doubled to £372mln from £200mln in the quarter to June 30, taking charges for the half-year to £896mln, up from £341mln last year.

Shore Capital analyst Gary Greenwood also pointed out the lender had made “a small downgrade to Barclays UK net interest margin guidance which we expect to have only a modest impact on the overall earnings expectations.”

He said the rise in impairments was £225mln than he expected better than the City had feared but the fall in investment banking income was around £130mln worse than expected.

Shell PLC (LON:SHEL) eased 2.1% after earnings tumbled, missing City expectations, due to lower oil and gas prices, offsetting news of new share buybacks and an increase to the quarterly dividend of 15% to US$0.33.

The oil supermajor reported second-quarter post-tax profit, or income, of US$3.1bn, plunging 64% year on year, so that income for the first half more than halved to US$11.9bn.

Stuart Lamont at RBC Brewin Dolphin, said: “Lower oil and gas prices have hit Shell’s revenues and profitability.”

“The company had previously set the scene with downgrades in its earnings estimates to reflect a more normalised trading environment, but it has still missed expectations with today’s results.”

Heading the other way was British Gas owner Centrica (LON:CNA) which recorded bumper profits during the six months to June 31, 2023, prompting a new wave of investment, a higher dividend and a larger share buyback.

Adjusted operating profit climbed by 55.2% over the period to £2.08bn, while net cash increased tenfold to £3.06bn.

Improvements in British Gas aided the surging profits, Centrica said in a statement, with the retail wing penning a tenfold increase in operating profit to £969mln.

Shell launches bumper buyback but profit slides

Shell PLC is launching US$5.5bn of new share buybacks and increased its quarterly dividend 15% to US$0.33 even after earnings tumbled due to lower oil and gas prices.

The oil supermajor reported second-quarter post-tax profit, or income, of US$3.1bn, plunging 64% year on year, so that income for the first half more than halved to US$11.9bn.

Earnings per share for the second quarter dropped to US$0.46 from US$1.26 in the first quarter and US$2.42 a year ago.

Chief executive Wael Sawan said the company had been affected by lower oil and gas prices and refining margins, lower volumes and lower LNG trading & optimisation results.

Barclays boosts dividend, share buyback but bad debts jump

Barclays PLC saw bad debt provisions more than double in the second quarter but still reported strong growth in profitability, boosted by rising interest rates, and a bumper share buyback.

In the three months to June 30, the high street lender reported pretax profit of £2.0bn compared to £1.5bn the year prior but income fell 6% to £6.29bn from £6.71bn hit by falls in investment banking.

Bad debt provisions nearly doubled to £372mln from £200mln taking charges for the half-year to £896mln, up from £341mln last year.

The rise in bad debt provisions come after peer Lloyds Banking Group (LON:LLOY) reported a big jump on Wednesday.

Looking ahead, Barclays expects its UK net interest margin to be less than 3.20% in 2023, with a current view of around 3.15% while it is targeting a return on total equity greater than 10% in 2023, consistent with our medium-term target.

Shareholders were rewarded with a 20% hike to the dividend to 2.7p from 2.25p while the bank also announced a £750mln share buyback.

BT holds guidance but predicts further fall in broadband customers

Some big beasts of the UK corporate world reporting today.

BT Group PLC (LON:BT.A) held guidance for 2024 after a modest rise in revenue in the financial first quarter but forecast a drop in broadband customers due to competitor losses and a weak broadband market.

In the three months to June 30, the telco said pro-forma adjusted revenue rose 4% to £5.2bn due to increased fibre-enabled product sales and price increases in Openreach, increased service revenue in Consumer and improved equipment trading in Business, offset partially by legacy product declines.

Pro forma adjusted EBITDA rose 5% to £2.0bn, up 5% with revenue flow through and cost control more than offsetting cost inflation while reported pre-tax profit climbed 11% to £536mln, primarily due to EBITDA growth.

The firm expanded its fibre to the premises footprint to 11mln premises, 44% of the way to its 25mln target, with a further 6.2mln where initial build is underway.

BT said Openreach broadband average revenue per user grew 10.2% year-on-year but the broadband base fell 126,000 in the quarter due to tough competition, a weak broadband market and communications providers ceasing copper lines.

BT continues to expect the Openreach broadband base to decline by around 400,000 in the financial year 2024.

FTSE 100 seen higher ahead of bumper day of earnings

Blue-chips are set to open higher on Thursday following the as-expected 25 basis point interest rate in the US which economists increasingly believe will be the last in this cycle.

Spread betting companies are calling the FTSE 100 up by around 15 points after closing down 14.91 points at 7,676.89 on Wednesday.

Investors are also preparing for another raft of updates from leading UK companies with Barclays, Centrica, Drax Persimmon (LON:PSN), BT and Rentokil Initial (LON:RTO) among the big names reporting today.

New York stocks closed Wednesday mixed in choppy trading after the latest interest rate increase by the Federal Reserve, which took borrowing costs to their highest level in 22 years.

James Knightley at ING Economics said: “The Fed unanimously hiked its policy interest rate range 25bp as widely expected with the statement retaining the phrasing that further policy firming “may be appropriate”.

“With two months’ worth of data to come before the next FOMC meeting, we suspect evidence of slowing inflation and softer activity won’t make that necessary,” he thinks.

The Fed’s chair Jerome Powell was coy when it came to future policy. He did not commit to another hold in September, but did not really choreograph another hike either, as he affirmed a “data-dependant” approach to future decisions.

Leaving the door open for future hikes this year, Powell ruled out cuts until the next at the earliest. “We will be comfortable cutting rates when are comfortable cutting rates”, he said.