On Friday, earnings updates from a raft of FTSE 100 companies dominated trade as investors shrugged off this week’s rate hikes by the Federal Reserve and ECB. A shift in policy by the Bank of Japan did little to upset UK stocks despite volatility overnight.

The FTSE 100 was dead flat at 7,693 at the time of writing on Friday, having given up early gains.

“Another week, another round of interest rate hikes. Under the circumstances, markets have held up remarkably well. As the trading week draws to a close, European stocks are doing their best to stay firm,” said Russ Mould, investment director at AJ Bell.

Investors were digesting the latest earnings updates from Standard Chartered, AstraZeneca and Natwest on Friday. All three companies were trading in positive territory at the time of writing.

“Standard Chartered jumped to the top of the FTSE 100 leader board after lifting its profit guidance and announcing a $1 billion share buyback. Its 5% share price gain was in stark contrast to the negative market reaction this week to other London-listed banks, with shares in Lloyds and Barclays both falling on their results,” said Russ Mould.

“AstraZeneca was in-demand after second quarter results beat estimates. That helped to breath some life back into its share price which had previously found it hard to break out this year.”

AstraZeneca shares were 4% higher shortly after 1pm on Friday.

Natwest

Natwest was the last of the three UK-focused FTSE 100 banks to report this week. There has been little to separate Natwest, Lloyds, and Barclays in terms of their outlook; all three expect their key profitability metric, Net Interest Margin, to fall in the second half.

Natwest did, however, please investors with better than expected operating profit which helped shares 3% higher on Friday. Barclays and Lloyds shares both fell after their updates. As one would expect, Natwest’s earnings call was dominated by further questions about the Farage saga, which led to CEO Alison Rose’s departure.

“It’s been a week to forget at NatWest as it’s had to lose two of its top execs because of the Nigel Farage account closure debacle. Today’s results probably don’t do the group any favours either, despite a slight beat on the bottom line,” said Matt Britzman, equity analyst at Hargreaves Lansdown.

“We know markets are laser-focused on net interest margin and at 3.13% for the second quarter that was below expectations, leading to a miss on net interest income. But perhaps more importantly, full-year guidance has been dragged lower reflecting the ongoing deposit shift to accounts that offer better rates as consumers do all they can to make cash savings go further.”

Commodities weakness

Strength in Standard Chartered, AstraZeneca and Natwest was evened out by weakness in the FTSE 100’s commodity companies as optimism around possible Chinese stimulus faded.

Miners Anglo American and Rio Tinto were among the loser, as were Shell and BP.

Aviva was down 2.6% after being downgraded to market perform by Keefe, Bruyette & Woods analysts. Admiral Group was the top faller shedding 2.9%.

WH Ireland shares were in freefall on Friday after the broker announced financial difficulties and the results of a placing completed at an 86.67% discount to last night’s closing price.

WH Ireland shares were down 66% at the time of writing after warning their cash had fallen below levels required by the FCA and had to urgently raise funds to avoid collapse.

News of the placing was released alongside a trading statement outlining poor performance in the three-month period ended 30th June. WH Ireland recorded a pre-tax loss of £1.1m in the period.

The broker is suffering in the face of lower capital markets activity and sees the challenges continuing until later this year.

In a statement released to the market, WH Ireland outlined the reasons for the placing:

“The Directors consider that, in light of the financial position of the Company set out above and given the challenging current market conditions (as well as the macro-economic pressures which continue to impact investment activity both in the UK and globally, across all sectors in which the Group operates), it is necessary urgently to boost the Company’s capital position through the Placing.”

The situation at WH Ireland has become so severe their cash levels dropped below their regulatory capital requirements and they have drawn up plans for an orderly wind-down as required by the FCA to protect consumers. WH Ireland said they would transfer clients to new advisors in such an event.

The broker and wealth manager said they hoped a wind-down could be avoided and were considering steps to reduce headcount and senior staff will take pay cuts. The company said these measures combined with today’s capital raise should provide a stable base going forward.

Phillip Wale, CEO, commented:

“The proceeds of today’s Placing bolsters our regulatory capital and together with the cost reductions we are implementing, we believe provide a stable platform from which the Company can navigate these challenging markets. I am grateful for the support of our existing and new shareholders and believe we are in a stronger position to take advantage of better market conditions as and when they come.”

The leading provider of hydrogen powered generator technologies AFC Energy (LON:AFC) has today announced a very interesting Joint Venture with the UK’s leading tools and equipment hire services company Speedy Hire (LON:SDY).

AFC Energy, which gained a £4.8m UK Government Grant a few days ago, provides hydrogen energy solutions, to provide clean electricity for on and off grid power applications.

Its fuel cell technology is now deployable as electric vehicle chargers, off-grid decentralised power systems for construction and temporary power with emerging opportunities across maritime, data centres and rail as part of a portfolio approach to the decarbonisation of society’s growing electrification needs.

Operating from some 180 fixed sites and selected B&Q stores across the UK and Ireland together with a number of on-site facilities at client locations, Speedy Hire provides tools and equipment hire services to a wide range of customers in the construction, infrastructure, industrial, and support services markets, as well as to local trade, and retail.

The rollout of AFC hydrogen fuelled generators into the UK construction and temporary power markets, will be speeded by the 50/50 JV being started shortly with an initial purchase of 30kW H-Power Generators for a consideration of some £2m in aggregate.

The first of these systems are expected to be available for Speedy’s customers later this year.

Beyond this initial commitment, Speedy and AFC plan to increase orders for H-Power Generators in-line with the expected growing demand for zero emission power across the UK construction and temporary power market.

Adam Bond, Chief Executive, AFC Energy, said: 

“The pressure to deliver zero emission power on construction sites here in the UK and overseas has seen strong growth in demand for AFC Energy’s H-Power Generators. 

Our collaboration with Speedy builds on the successful H-Power Tower launch last year and subsequent field-based deployments, many of whom are customers of Speedy, making our proposed collaboration all the more relevant.” 

Broker’s Opinion – indications of a material upside to the share price

Ahead of the £116m capitalised group announcing its Interim results shortly, analyst Robin Byde at Zeus Capital, considers that the decarbonisation of major projects in the UK is gathering pace and he believes that this is a major step forward for commercialisation at AFC, addressing a multi-billion-pound market.

He notes that he has a discounted cashflow based valuation of 100p on the AFC shares, giving a massive upside for the share price which opened 12.5% better at 16.5p this morning.

Natwest has been in the news for all the wrong reasons over the past two weeks and they could have done without additional media scrutiny of their Q2 results.

That said, Natwest investors will be reasonably happy with Natwest’s first-half performance. Operating profit before tax surged to £3.6bn, up from £2.6bn in the same period a year ago, and beat analyst estimates.

Natwest enjoyed the higher interest rate environment and net interest margin – a key profitability metric – rose to 3.20% in H1 2023 compared with 2.58% a year ago.

However, Natwest said they now expect full-year net interest margin to be less than 3.20% at 3.15%, assuming the Bank of England base rate stays at 5.5% throughout the rest of the year. A similar step was taken by Barclays yesterday.

Natwest recorded a net impairment charge of £223m in the last quarter. Natwest said arrears are low and defaults are stable but were taking the measures due to increasing macroeconomic uncertainties. UK banks are facing the difficult task of modelling default rates in an increasingly uncertain environment which so far hasn’t shown any great signs of stress.

Natwest shares were 1.7% higher at the time of writing.

Matt Britzman, equity analyst at Hargreaves Lansdown, provided context to today’s results and highlights Natwest’s result are playing second fiddle to the Farage saga.

“It’s been a week to forget at NatWest as it’s had to lose two of its top execs because of the Nigel Farage account closure debacle. Today’s results probably don’t do the group any favours either, despite a slight beat on the bottom line. We know markets are laser-focused on net interest margin and at 3.13% for the second quarter that was below expectations, leading to a miss on net interest income,” Britzman said.

“But perhaps more importantly, full-year guidance has been dragged lower reflecting the ongoing deposit shift to accounts that offer better rates as consumers do all they can to make cash savings go further. NatWest should be a little more robust than peers in this regard, owing to the fact more of its deposits are held by small and medium-sized businesses which tend to keep more cash current accounts that are more profitable for banks.”

UK stocks took rates hikes by the Federal Reserve and European Central Bank in their stride on Thursday as the FTSE 100 gained helped higher by upbeat earnings.

Thursday was a busy day for FTSE 100 earnings updates as companies including Shell, Barclays, Centrica, St James’s Place and BT issued updates.

Although there were disappointing results from Barclays, St James’s Place and to some extent Shell, Centrica, Informa, Fraser’s Group and Informa results helped drive the index higher.

The FTSE 100 was 0.25% higher at the time of writing.

St James’s Place was the FTSE 100 biggest loser after the wealth manager said new business was falling and funds under management also declined. St James’s Place shares were down 15% at the time of writing.

Centrica shares were 7% to the good at the other end of the leaderboard after releasing bumper profits for the first half of 2023. Centrica’s Adjusted operating profit rose by £2.1bn from £1.3bn in 2022 due to higher energy prices and increased trading activity.

“British Gas owner Centrica won’t be winning a popularity contest with the public anytime soon, but shareholders may not be too bothered,” said AJ Bell investment director Russ Mould.

“The massive increase in first-half profit reflects the impact on its retail energy-facing business of a lifting of the price cap but the contribution made by its energy marketing and trading division, helped by the big volatility in commodity prices, should not be ignored.

“The strengths of Centrica’s integrated model have really come to the fore in recent times and after several lean years, the company is able to reward investors handsomely – lifting its dividend substantially and extending a share buyback.”

Barclays

Having recovered from the worst levels of the session, Barclays were down 3.5% on the back of disappointing investment banking activity in the last quarter. A downgrade to their net interest margin didn’t help matters and Barclay’s key measure of profitability now looks to have peaked.

“The market does not like the latest round of results from UK banks. Investors gave the thumbs down to Lloyds’ results yesterday and now they are doing the same to Barclays, with its shares down more than 6% in early trading,” Russ Mould said.

“Even though Barclays slightly beat analyst consensus profit forecasts and announced a bigger than expected share buyback of £750 million (consensus: £575 million), there were two points in the results that didn’t go down well.

“First, it has downgraded guidance for UK net interest margins to less than 320 basis points compared to previous guidance of more than 320 basis points. Second, it suffered from a drop in dealmaking for its investment banking arm.”

Shell shares were 1.5% lower after reporting falling adjusted earnings amid lower oil prices and gas volumes.