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Today's markets: Natwest adds to income bonanza, IAG loses €190m a week, Amazon stumbles & more

London shares are off colour again but income investors have had quite a week
July 30, 2021

 

  • Natwest pledges £3bn over 3 years
  • Rightmove benefits from booming housing market
  • Robinhood IPO flops

A real Jekyll & Hyde week continues for equity markets with shares in London giving up a lot of yesterday’s gains in early trading today. Asian markets overnight continued their subdued performance as concerns over ongoing Chinese regulatory tightening in some sectors allied to an alarming surge in the Delta variant of Covid in many Asian countries helped to dampen investor enthusiasm. Just before 9am this morning the FTSE100 was off 0.9 per cent and the mid cap FTSE250 0.7 per cent lower. Notable results to end what has been a particularly heavy week for corporate announcements in London come from International Consolidated Airlines (IAG), the owner of British Airways, which welcomed the easing on restrictions for inbound travel from the US and EU, high street bank NatWest (NWG), which announced a significant cash distribution programme, and estate agency portal Rightmove (RMV).  

Income bonanza

What a week for income investors. The economic recovery coupled with surging commodity prices over the past six months has fed into a rapid improvement in profitability for a number of heavyweight dividend payers. 

And income investors were further boosted today with the news that Natwest is planning to return £3bn to investors over the next three years. The bank, which is still more than 50 per cent owned by the government after the bailout of RBS more than a decade ago, announced sharply improved profits for the half year to June of £1.84bn - boosted by it writing back some hefty loan provisions after its worst case scenario of UK economic meltdown was averted. Both customer deposits and mortgage lending rose in the first half of the year, by £12.1bn and £7bn respectively.

Meanwhile, yesterday was ‘Super Thursday’ for dividends with the strength in commodity prices feeding into surging payouts at Anglo American, Rio Tinto and Shell while the recovery in the UK economy and the booming housing market enabled Lloyds to sweeten its distributions too. In total more than £7bn of dividends and shareholder distributions were announced yesterday. 

See more: 

Diageo recovers on the back of premium brands

Anglo American hits record profit, passes it on to shareholders

BAE on the buyback trail

Shell's dividends back to the future on strong oil prices

Pharma focus

The UK's pharma giants have also been in focus this week with results from GlaxoSmithKline and AstraZeneca. To add to this our cover feature special this week is an in depth look at pharma companies and their prospects beyond Covid. 

 

 

IAG to benefit from travel restriction changes

News earlier this week that inbound travellers from the EU and US will no longer have to quarantine if they have been double vaccinated should improve the prospects of long haul operators such as British Airways, which relies heavily on US routes. In half year results this morning BA owner International Consolidated Airlines (IAG) said it had only been able to fly 20.8 per cent of its pre-pandemic capacity and was only envisioning this rising to something like 45 per cent over the second half, a considerably less bullish outlook than budget airline rivals easyJet and Ryanair indicated in their recent updates. IAG has been burning through something like €190m a week during the most recent period and posted losses of €2bn for the six months to June. 

Read our take on the results here. 

Rightmove, wrong market? 

Estate agent portal Rightmove (RMV) this morning summed up the current heat of the housing market when it said its revenues from new build sales had been weaker than expected because many new build developments were simply selling themselves. Such has been the demand for new build in recent months that developers have been able to scale back their marketing spend with partners like Rightmove as they simply don’t have to try very hard to sell. 

Of course, this may likely change as stamp duty holidays wind down over the next two months but Rightmove continues to make hay while the sun is shining on the property market. It posted a 58 per cent rise in half year revenues to £149.9m although this was set against a pandemic affected period last year but was still 4 per cent ahead of its 2019 performance. Underlying operating profit almost doubled to £117.1m.

Amazon retail sales dip

Amazon ended ‘big tech’ week in the US with another set of strong results although notable for a flattening of the growth curve in its core online retail business as the easing of pandemic restrictions in many parts of the world had an effect. The online store business saw growth of ‘only’ 15 per cent, its slowest since 2019, but strong growth in other areas such as the AWS cloud computing division enabled Amazon to post revenues above $100bn for the quarter at $113bn although this fell just short of analyst expectations of $115bn. Nonetheless the company was able to grow profits by 50 per cent to $7.8bn. 

Read more.

Robinhood stumbles

The much anticipated IPO of online broker Robinhood in New York turned out to be something of a damp squib with the shares ending the day down in the region of 8 per cent at $34.82 having listed at $38. There was a certain irony in a company which has done so much to bring a new wave of investors to the equity markets being effectively shunned on its public market debut but it reflects some of the concerns raised about the company of late and how robust its future growth will be and whether it can keep the new generation of investors it has attracted to the markets through leaner times for equities. 

Read more: 

Robinhood is cashing out on the retail boom - but risks abound

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