Barclays shares dip as investors book gains despite strong Q4 results
Barclays shares dropped in early trade on Thursday as investors booked recent gains for the bank following the announcement of Q4 and full-year 2024 results.
All in all, there was a lot to like in Barclay’s update. Profit was higher due to increased income and marginally lower costs. Impairments were fairly steady.
Net interest margins, a key indicator of profitability, rose to 4.28% in 2024 from 4.11% in 2023, excluding head office and investment bank activities. Given interest rates were expected to fall last year, the rise in net interest margins was a big win for the bank.
But all of this appears to have been baked into the Barclays share price cake, and the report offers little in the way of positivity about the outlook, and investors took the chance to bank gains, sending the stock down around 4%.
A further £1 billion share buyback and promise of £10 billion in share buybacks by 2027 was welcome news but failed to propel the stock higher. Perhaps investors were hoping for a little more from the bank.
“Early price action for Barclays looks a little harsh after the group set a decent benchmark for the banking sector, closing the year with an impressive final quarter as both its UK and Investment Banking arms delivered,” said HL’s Matt Britzman.
“Credit quality remains solid, with loan loss rates comfortably below target, and while there was a dip in the final quarter, stripping out the higher-risk business from the Tesco deal shows that credit performance actually improved. With more exposure to US consumer trends than most UK peers, stable US card default rates should also be reassuring for investors.”
Barclays’ Investment Bank is a big differentiator for the group when compared to the other FTSE 100 banks, and investors will be pleased to see 28% income growth in the unit during the fourth quarter.
“In Investment Banking, Barclays didn’t disappoint, surpassing profit expectations and seeing growth in fixed income and equities that outpaced even the US giants,” Britzman explained.
There will be a big focus on provisions for motor financing this banking earnings season, with investors quietly confident that the recent interventions by the UK government may result in better outcomes for the banks. Barclays wasn’t one of the most heavily involved banks, but it still made provisions for any potential redress.
“On motor finance, the bank set aside £90m in provisions, and with players like Close Brothers maintaining optimism, there’s growing hope that the impact won’t be as severe as first feared – Lloyds will be the key one to watch and the most exposed from the major UK banks,” Britzman said.
UK GDP grows more than expected on stronger services and construction activity
The UK economy unexpectedly grew in the fourth quarter of 2024 after flatlining in the third quarter, offering some respite to the UK government, which has orchestrated a slowdown through damaging policy decisions.
The fallout of the autumn budget and generally downbeat economic rhetoric from the UK government was expected to see UK GDP fall 0.1% in the final quarter of last year, so the small expansion will be music to Rachel Reeves’s ears, despite an uninspiring outlook.
“This morning’s UK GDP figures were marginally better than expected, with the economy growing by 0.1% QoQ in the final three months of 2024,” said Michael Brown Senior Research Strategist at Pepperstone.
“That said, such an anaemic pace of economic growth is hardly worth celebrating, and doesn’t materially alter the UK economic outlook.”
Construction was one of the areas that displayed strength in the quarter, with growth of 0.5%, while a 0.2% increase in the services sector helped keep the economy on course.
The small beat of expectations is encouraging for the UK economy, but it will do little to improve the perception of where the UK economy is going in 2025. Recession risks are still present, and the reading has done little to help the Bank of England.
“The data challenges the Bank of England’s decision to halve its growth forecasts for the UK economy this year, although headwinds certainly remain,” said Harry Woolman, Analyst at Validus Risk Management.
“Stagflation remains a real possibility amid underwhelming growth and persistent price pressures, whilst today’s reading, despite being in positive territory, is not exactly a blockbuster print.”
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NatPower UK secures £60m to develop large-scale battery storage GigaParks
NatPower UK secured up to £60 million in funding from European infrastructure bank Kommunalkredit to develop large-scale battery storage facilities known as GigaParks.
The company’s ambitious portfolio includes three 1-gigawatt GigaParks planned for North Yorkshire and Tees Valley, with projects totalling 100 gigawatt-hours (GWh) in various stages of development.
To put this scale in perspective, these facilities are expected to meet the entirety of the UK’s 2030 storage target. Storage is vitally important for achieving energy transition goals due to the challenges of connecting renewable power infrastructure to the grid.
The funding deal represents a significant shift in how large-scale battery energy storage systems (BESS) can be financed. These facilities will play a crucial role in managing the UK’s growing renewable energy infrastructure by storing clean energy during low-demand periods for use during peak times.
NatPower UK’s GigaParks are designed to address two key challenges in Britain’s energy transition: managing intermittent renewable energy supply and reducing dependence on imported gas. The projects are expected to contribute to lowering overall energy costs for consumers while supporting the nation’s clean energy goals.
“The UK’s energy transition will provide huge opportunities for economic growth, generating tens of thousands of green jobs, creating sustainable communities and bringing down bills, and attracting a significant portion of the trillions that will be invested in the sector each year globally,” said Stefano D. M. Sommadossi, CEO at NatPower UK
“With huge changes currently being made to the connections process, the UK’s energy grid will require an acceleration of private capital to ensure we can deliver the right projects as quickly as possible. Our agreement with KommunalKredit signals that this is well underway, showing confidence from the market not only in the opportunity the UK presents, but also in NatPower UK’s portfolio and strategy for delivery.”
FTSE 100 trades sideways as traders await catalyst
The FTSE 100 traded sideways in a tight range on Wednesday as investors awaited the next major catalyst for equities.
The new US president has dominated trade since his inauguration but has been fairly quiet over the past few days, leaving traders at a loss as to what to expect next.
US economic data due for release on Wednesday could well provide an impetus for a move in equities, but until then, investors are seemingly happy to hold back on taking macro-driven positions.
“There’s an overarching sense of calm in the air, perhaps a little unnerving given the storm of political drama we’ve become accustomed too since Tump took office,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
“The FTSE 100 opened flat this morning, and after posting another record high yesterday it’s still riding on a wave of enthusiasm. US inflation data has scope to upset the apple cart later today, but for now at least, it’s robust company earnings that are driving markets forward.”
The latest set of upbeat earnings came from Barratt Redrow, who said they see earnings coming in at the top end of the range as completions rose.
“Housebuilder Barratt is reaping the rewards of a more stable economy and political landscape, with customer demand bouncing back and strong reservations since January,” Britzman explained.
“As a result, Barratt is now targeting the upper end of its profit expectations for the year which, when combined with good execution over the first half, should go down well with investors. Following the acquisition of Redrow, Barratt’s capital plans are in the spotlight, with the company poised to launch a £100mn annual buyback, leveraging improved cash flow and a robust capital position.”
Barratt Redrow shares were 5% at the time of writing.
Prudential was the top riser after it said it was considering selling shares in its Indian ICICI Prudential Asset Management business and would return the cash to investors. Prudential was 6% to the good around midday on Wednesday.
AIM movers: Surgical Innovations returns to profit and Goldplat gold sale delay
Cannabis-based medicines developer Celadon Pharmaceuticals (LON: CEL) has received the final £103,000 of the £1m drawdown under the committed credit facility. It has also received a £389,000 R&D tax credit for 2022. The share price increased 19.4% to 21.5p.
Surgical instruments manufacturer Surgical Innovations (LON: SUN) has returned to profit in the second half of 2024, although the full year loss could still be £300,000. Trading was broadly in line with expectations. Net debt was £300,000 at the end of 2024. Brent Greetham has been appointed as finance director. The business restructuring of the business will benefit the 2025 figures. The share price recovered 18.2% to 0.65p.
Battery technology developer Gelion (LON: GELN) has successfully tested its Gen 3 sulfur cathode material with solid-state electrolyte material. This was done by a third party and shows it could replace Li-ion cathodes in sulfide electrolyte solid state batteries. Work will still have to be done to confirm commercial viability. The share price is 10.4% at 13.25p.
Bezant Resources (LON: BZT) has completed ore sorting optimisation on copper-gold ore from the Hope & Gorob project in Namibia. Grade and recovery levels exceeded those of the financial model of the project. Ore sorting tests recovered a feed grade of up to 2.95% copper. Silver grades also significantly exceeded expectations, while gold grades were in line at 0.42g/t. Payback of capital could take less than 20 months. The share price rose 8.51% to 0.0255p.
FALLERS
Gold recovery company Goldplat (LON: GDP) generated lower profits in the second quarter to December 2024. Gross operating profit fell from £3.4m to £2.5m. In Ghana, some gold sales were delayed until January. Goldplat is making progress in setting up a site in Brazil. The board is considering reinstating the dividend. Full year pre-tax profit is forecasts to decline from £4.3m to £4.2m and net cash could reach £4.3m. The share price declined 9.54% to 6.875p.
Goldstone Resources (LON: GRL) achieved a record gold pour of 16.25kg of gold dore, equivalent to 522 ounces, on 10 February. Monthly gold production has doubled since November. Operations continue to be ramped up. The target is 1,000 ounces of dore/month. The share price fell 8.51% to 1.075p.
Wound healing technology developer AOTI Inc (LON: AOTI) says 2024 revenues will be in excess of $58.1m, up from $43.9m. The Veterans Association accounted for less than three-fifths of revenues as new markets are developed, and they will become increasingly important. However, payments are slower. The full figures will be published on 26 April. Growth is expected to be more than 30% in 2025. The share price slipped 8.7% to 105p.
Checkit (LON: CKT) shares have fallen a further 4.84% to 14.75p following yesterday’s announcement of the merger with Crimson Tide (LON: TIDE). The bid is six Checkit shares for each Crimson Tide share. That values Crimson Tide at 88.5p. The Crimson Tide share price is unchanged at 87.5p.
Barratt Redrow shares jump on strong half year report
Barratt Redrow shares jumped on Wednesday after reporting a remarkably upbeat set of half-year results, with the housebuilder now expecting full-year adjusted profit before tax to reach the upper end of market expectations.
Results are released against a backdrop of uncertainty around the UK economy and the housing market, making Barratt Redrow’s upbeat assessment of their activities a breath of fresh air for the market.
The company, which recently acquired Redrow, delivered 6,846 total home completions in the period, showing an improvement from Barratt’s standalone figure of 6,171 in the previous year.
Investors will find the group’s sales performance has been particularly encouraging, with the net private weekly reservation rate increasing by 33% to 0.60, compared to the combined Barratt and Redrow rate of 0.45 in the same period last year.
This sales momentum has continued into the new year, with reservations maintaining a rate of 0.60 from 30 December 2024 to 2 February 2025.
Forward sales remain healthy, with 10,903 homes valued at £3,350.3 million as of 2 February 2025. Of these, 7,702 homes are either exchanged or contracted, demonstrating strong conversion of reservations to firm sales.
The company has provided guidance for total home completions between 16,800 and 17,200 for the full year, including approximately 600 joint venture completions. These full-year forecasts are perhaps the driving force in the 5% gain in shares at the time of writing.
Financial results show adjusted profit before tax of £167.1 million, after accounting for purchase price allocation adjustments of £50.4 million related to the Redrow acquisition. The company maintains a robust balance sheet with net cash of £458.9 million, despite paying a final dividend of £170.5 million and increasing investment in land and work in progress by £332 million.
“Barratt Redrow sprinkled some optimism into the UK housing sector this morning, as Britain’s biggest builder reported earnings at the upper end of market expectations. Strong demand heading into 2025 was reinforced by the seamless integration of Redrow, which is now on track to deliver over £100m in cost synergies,” said Mark Crouch, market analyst at investment platform eToro.
“With UK housebuilders battling numerous challenges in recent months, this morning’s update will come as a relief to investors, as Barratt bucks the trend of disappointing sector earnings. Higher mortgage rates and building costs have weighed heavily on profitability for housebuilders, and while Labour’s planning reforms are expected to help, their impact will take time.”
Helium One shares jump as anticaption builds around Colorado helium project
Helium One Global shares jumped on Tuesday as anticipation around its US helium operations gathers momentum.
The company recently modified its winter drilling schedule due to poor weather conditions across North America. The company said the drill rig would be mobilised this week, and today’s rise can be attributed to expectations of an update from the company on how the recommencement of operations has gone.
After weeks of the share price steadily ebbing away, renewed interest in the stock on Tuesday sent shares 15% higher. The 1p mark still remains a crucial resistance level, with profit takers more than happy to book gains when the price creeps above it.
Helium One, in partnership with Blue Star Helium, is developing a project in Colorado that is expected to achieve its first gas production in 2025.
Investors will be eager to learn whether rig mobilisation went as planned. The company said workers are laying gravel on access roads to the Jackson-31 and Jackson-4 locations, enabling operations to continue through Colorado’s severe winter conditions, which have recently affected much of the United States. After lengthy delays at their African projects in 2023, Helium One investors should be accustomed to waiting for the drill bit to start spinning.
The drilling campaign will initially target the Jackson-31 SENW 3054 well, followed by Jackson-4 L4 3154. Three additional wells have received approval, with their drilling sequence to be determined following the completion of Jackson-4.
An update on the Pinon Canyon processing plant also provided reason to be optimistic. Development continues on the Pinon Canyon processing plant, which remains on track to begin gas production in the first half of 2025. The engineering and permitting work for the facility is progressing as planned.