FTSE underperforms, as Lloyds resumes the dividend

It’s been another mixed start for European markets this morning, with yesterday’s outperformance on the part of the FTSE100 being reversed in early trade, with the stronger pound acting as a bit of an anchor around the UK blue chip benchmark. The DAX is modestly higher after posting heavy falls yesterday.

Asia markets had a predominantly negative session with the Nikkei 225 closing below the 30k level for the first time in over a week, with Hong Kong shares leading the decline after it was announced that the Hong Kong government was increasing stamp duty taxes on share trading from 0.1% to 0.13%.

HSBC and Standard Chartered bank shares are down sharply on the back of this morning’s slide in the Hong Kong market.

The last 12 months have been a challenging one for UK banks, however Lloyd full year results suggest that they have been able to cope fairly well despite taking significant provisions in respect of non-performing loans. More importantly, despite a fall in profits from last year they present a fitting legacy to outgoing CEO Antonio Horta-Osorio’s ten-year tenure.

Today’s full year numbers have shown that statutory profits for Q4 came in at £792m, well above expectations of £471m, and taking statutory full year profits after tax to £1.39bn, a decline of 54% from last year.  

Net interest margin for Q4 did improve slightly from Q3’s 2.4% rising to 2.46%, but still well below last year’s levels of 2.88%. It would appear that the recent steepening in UK yields has offset some of the weakness seen in Q3, however over the year NIM have still come down to an annualised 2.52%. 

More importantly from a shareholder point of view the bank announced a dividend of 0.57p a share, with the shares hitting their highest levels in 11 months above 40p.

Consumer goods company Reckitt Benckiser has posted a decent set of full year numbers, as well as announcing that it is selling its Scholl brand to Yellow Wood partners, while looking to acquire Biofreeze, a pain relief gel brand, which uses a combination of various mint products to relieve muscle pain. The company also said it was doing a strategic review of its Chinese baby formula business, which it acquired as a result of its Mead Johnson takeover.

Total sales for the year saw an increase of 8.9% to just under £14bn, with the bulk of that gain coming from a 15.6% rise in its hygiene brands, while health also contributed with a 9.6% rise in sales, as Covid-19 acted as a catalyst for a strong year.

Sales of products like Lysol performed well along with Dettol as consumers became more hygiene conscious, however despite this, profits were down from 2019 levels, largely as a result of higher costs, and a goodwill impairment of £985m.

The company said it plans to pay a full year dividend of 174.6p, unchanged from a year ago.

Avast shares have popped higher this morning after announcing a partnership with PMovil, a billing aggregator in Latin America with access to over 400m customers.  

Vodafone this morning confirmed that its upcoming Vantage Towers IPO would take place before the end of next month on the Frankfurt Stock Exchange.

Aviva this morning confirmed the exit of another one of its non-core businesses, selling its 40% stake in its Turkey venture for £122m.

The pound continued its recent move to multi year highs against the US dollar as short sterling traders started to hedge their positions against a possible interest rate rise by 2024.

US markets look set to open unchanged when they re-open later today, holding onto their late rebound into the close last night.

The rebound in bitcoin back above $50k could well precipitate a similar rebound in the Tesla share price later today, and help reverse a three day decline which saw Tesla’s share price fall below the level it entered the S&P500.

We have the latest earnings from the likes of Six Flags and CBS Viacom before the bell, as well as looking ahead to part two of the Powell testimony to the House Financial Services committee, where the tone of the questions is likely to be fairly similar. Later in the day we also get to hear from Fed vice chair Richard Clarida, and permanent Fed governor Lael Brainard.

Dow Jones is expected to open 10 points lower at 31,537.

S&P500 is expected to open unchanged at 3,881.