FTSE slumps as NatWest announces bumper payout

·3-min read
NatWest has followed in the footsteps of Barclays and Lloyds earlier this week by reporting decent earnings. Photo: Reuters
NatWest has followed in the footsteps of Barclays and Lloyds earlier this week by reporting decent earnings. Photo: Reuters

European markets were down on Friday as NatWest (NWG.L) announced a share buyback of up to £750m ($1bn) and a 3p dividend.

The bank posted a pre-tax profit of £2.5bn for the six months to June, up from a loss of £770m in the previous year but its stock was down 0.9% as markets closed in London.

It's board declared an interim dividend of 3p a share and said it intends to distribute a minimum of £1bn a year from 2021 to 2023 by declaring ordinary and special dividends.

"These results have been driven by good operating performances across the group, underpinned by a robust loan book and a strong capital position," said CEO Alison Rose.

“There are some headline-grabbing shareholder returns in this announcement as the best capitalised of the UK’s large banks starts to wind down it’s huge war chest," said Nicholas Hyett, equity analyst at Hargreaves Lansdown.

"However, compared to rivals Barclays (BARC.L) and Lloyds (LLOY.L), the underlying trends are a bit weak. Mortgages have boosted loan growth, but more profitable unsecured lending looks a little sluggish," he added.

The FTSE 100 (^FTSE) closed 0.5% lower. Its top fallers included product testing and certification company Intertek Group (ITRK.L) and British Airways parent IAG (IAG.L). Both had announced their results today and both closed down roughly 7%.

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Intertek’s interim results showed it was recovering from the depths of "pandemic-induced recessions around the world," said Steve Clayton, fund manager of the HL Select UK Growth Shares fund, which holds Intertek.

"But expectations for Intertek’s ability to translate any recovery into higher margins were high. So far, the group is lagging a little on the margin front, even though pretty much all parts of the business are now seeing demand bouncing back."

As for IAG, in the six months to 30 June, it flew 20.8% of 2019 capacity due to COVID restrictions, and its revenue was down 58.2% to €2.2bn (£1.8bn, $2.6bn).

"Long-haul traffic will be last to recover, and IAG’s position within Europe means it’s at the mercy of many of different government restrictions," said Laura Hoy, equity analyst at Hargreaves Lansdown.

Germany's DAX (^GDAXI) lost 0.4%, and the CAC (^FCHI) fell 0.14% at close.

Across the Atlantic, US indices opened in the red. The S&P 500 (^GSPC) was down 0.5%. The Dow (^DJI) ticked 0.3% and the Nasdaq (^IXIC) lost 0.8%.

Investors are likely rattled by disappointing numbers from Amazon (AMZN), which itself was down more than 7%. Its revenue grew by 27% year over year to $113.08bn, but missed analyst estimates.

"The global equity market sentiments have remained dispirited, with investors desperately looking out for meaningful breakthroughs that can guide an all-inclusive recovery," said Kunal Sawhney , CEO of equities research firm Kalkine Group.

Overnight in Asia markets took a beating amid China's sweeping moves against the private tuition, tech and property sectors, as rising COVID cases continue to hurt economies. 

The Hang Seng (^HSI) was down 1.4%. The SSE Composite (000001.SS) closed 0.4% lower and the Nikkei (^N225) lost 1.8%.

"The longer-term outlook may still depend on whether Beijing can calm investor nerves about subsequent regulatory clampdowns and the growth impact on its domestic firms," Yeap Jun Rong, market strategist at IG said in a note.

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