Natwest sees profits surge by 82% as it recovers money set aside for bad loans

Liam Roche
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Natwest sees profits surge by 82% as it recovers money set aside for bad loans

Natwest CEO in optimistic mood as UK makes recovery

Natwest (LON:NWG) has confirmed a dramatic increase in its profits as it joined other banks in getting back money initially allocated to covering bad loans.

The part state-owned bank said its profits before tax rose by 82% to £946m for Q1 as £102m of funds were released.

The bank also said that support given out by the government was ensuring that businesses are not defaulting on their loans.

Chief executive Alison Rose said there were “reasons for optimism” as the UK’s vaccine rollout moves along and restrictions are eased while its loan book had performed better than expected in the period.

“However, there is continuing uncertainty for our economy and for many of our customers as a result of COVID-19,” she added.

Natwest followed the path of two of its main competitors in HSBC and Lloyds who both earned back billions set aside in case loans went bad due to the pandemic.

Natwest’s profit came a year after it fell to a £351m loss for 2020 when is set aside £3.2bn was an insurance against loans going bad.

Natwest releasing £102m amounts to a small part of this figure, mainly reflecting the bank’s commercial lending, as “support schemes continue to mitigate realised levels of default”.

The bank – formerly known as the Royal Bank of Scotland – profited from a surge in mortgage lending as there was an upturn in the housing market, with loans for new homes amounting to £9.6bn over the last quarter, up by over £8.4bn from the three month period that came before.

Retail bank customer deposits rose by 4.2% to £179.1bn since the end of 2020 as spending slumped and savings increased in lockdown.

Last month the UK Treasury announced it has finalised the sale of £1.1bn worth of shares back to Natwest. The Treasury’s stake in the British bank is now down to 59.8% from 61.7% following the third sale of its holding.

Greatland Gold reports ‘excellent’ growth drilling results at Havieron

Liam Roche
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Greatland Gold reports ‘excellent’ growth drilling results at Havieron

Greatland Gold expecting the establishment of the portal in the coming weeks

Greatland Gold (AIM:GGP) has provided an update on the drilling campaign at the Havieron deposit in the Paterson region of Western Australia, which it is developing under a joint venture with Newcrest.

The latest results further highlight the potential for extensions to the Initial Resource published last December, according to the AIM-listed company.

Early works are advancing with the box cut 90% complete and surface works 85% complete. 

Greatland Gold also said it is expecting the establishment of the portal in the coming weeks.

Results from Growth Drilling continue to support the potential for resource expansion of the Havieron gold-copper mineralised system, particularly within and around the Northern Breccia, and below the Inferred Mineral Resource estimate in the South East Crescent Zone and adjacent Breccia Zones.

The precious metals company also reported “excellent” results from infill drilling.

“The high-grade infill drilling results provide additional confidence of both geological and grade continuity within the existing resource shell,” the update said.

Figure 1
3D Plan view schematic showing the spatial association of the South East Crescent + Breccia, North West Crescent, Northern Breccia and Eastern Breccia targets.

Diagram Description automatically generated

Northern Breccia:

Hole HAD083BW4: 156.6 metres (m) @ 1.1 grams per tonne (g/t) gold ( Au) and 0.22% copper (Cu) from 805.8m, including 27.4m @ 2.6g/t Au & 0.49% Cu from 923.5m.

Hole HAD090: 119.0m @ 1.0g/t Au & 0.11% Cu from 954.7m, including 13.0m @ 4.1g/t Au & 0.67% Cu from 1042.2m

Hole HAD106W1: 73.9m @ 1.5g/t Au & 0.13% Cu from 673.1m

South East Crescent and Breccia:

Hole HAD086: 72.0m @ 2.2g/t Au & 0.02% Cu from 1281m.


Figure 2
Plan view schematic of a horizontal slice at 4700mRL through the Crescent Sulphide Zone and Breccia-hosted Zones, showing the extents of the December 2020 Inferred Resource, 0.5 and 1.0 g/t Au LeapfrogTM grade shells with the newly reported intercepts for this period shown in red trace. Also shown is the Eastern Breccia, Northern Breccia and North West Crescent mineralisation outlines projected to the 4700mN section – drilling is ongoing to confirm the extent of these zones. Drilling reported in the 11th March 2021 announcement is shown in blue trace. Drilling previous to this is not shown for clarity.

Diagram Description automatically generated


The 2021 Growth Drilling programme is ongoing, with priorities established in North West Crescent and Northern Breccia, Eastern Breccia, South East Crescent and Breccia and new targets outside of the immediate vicinity of the Havieron deposit.

“We are very pleased with another set of excellent results which continue to highlight the world-class potential of Havieron. The latest results from the infill and growth drilling campaigns further support the delivery of an indicated mineral resource as well as the potential expansion of the Havieron gold-copper mineralised system,” said Shaun Day, the chief executive officer of Greatland Gold.

“Alongside this, the joint venture continues to advance earthmoving activities with the box cut and surface works nearing completion and the portal and decline progressing to plan. With the 2021 65,000m drilling campaign well underway and the early works programme progressing at pace, we look forward to updating the market on the continuing progress at Havieron,” he added.

New premium listing/demerger: Wickes

Andrew Hore
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New premium listing/demerger: Wickes

Builders merchant Travis Perkins has demerged the Wickes home improvement retail business. This is an area that has held up well during lockdowns. Trade demand was reduced, particularly last spring, but there was more DIY spending.
The underlying market has been growing consistently and this should continue. Wickes is in a good place to take market share.
At the Travis Perkins general meeting to approve the demerger, 44.7% of votes were cast against the Wickes share plans. These involve transitional awards to executive directors of Wickes. The ISS had advised shareholders to vote against the r...

Fresnillo shares down on Q1 output update

Liam Roche
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Fresnillo shares down on Q1 output update

Fresnillo maintains 2021 guidance despite continued uncertainty

Fresnillo (LON:FRES), the world’s largest producer of silver, released a Q1 output update on Wednesday which said its production of silver had declined.

The FTSE 100 company’s attributable silver production was 12.6 moz, down by 2.4% from the quarter before.

The fall came about as a lower volume of ore processed as San Julián Disseminated Ore Body and a lower ore grade at Saucito and the Pyrites plant. This was partly mitigated by a higher development ore grade at Juanicipio.

Production of gold was up by 5.9% quarter-on-quarter to 228.2 koz, as a result of a higher ore grade at Herradura and Saucito. These results were counteracted by lower volumes of ore processed at Noche Buena and reduced ore output throughout and lower ore grade at San Julián Veins.

The company maintained 2021 guidance despite the continued uncertainty presented by the current coronavirus situation in Mexico.

Octavio Alvídrez, chief executive of Fresnillo, commented:

“The health and well-being of our people remains our first priority and we have maintained a range of measures to ensure their safety, while also continuing to support our local communities.”

“First quarter silver production was marginally below the previous quarter, with the encouraging contribution of development ore from our new Juanicipio project offsetting lower grades at Saucito. I am also pleased to report continued progress at the Fresnillo mine with development rates showing an improvement. Quarterly gold production was ahead of the last quarter driven by the higher than expected grade at Herradura. Construction of Juanicipio is making good progress and we are on track to commission the plant by the fourth quarter.”

“Though the pandemic continues to present certain operational challenges, Fresnillo has started 2021 well with Q1 operations in line with expectations and our full year guidance remains unchanged.”

Sainsbury’s records loss as Covid and Argos costs spiralled

Liam Roche
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Sainsbury’s records loss as Covid and Argos costs spiralled

Sainsbury’s underlying profits fell by 39% to £356m from £586m

Sainsbury’s (LON:SBRY) recorded an annual loss as the cost of serving customers during the pandemic, along with its transformation of its Argos business weighed down on its balance sheet.

The FTSE 100 supermarket chain confirmed on Wednesday that is made a loss before tax of £261m for the year ending March 6, a swing from a £255m pre-tax profit the year before. The results followed £321m worth of write downs which were in the most part connected to its decision to shut 420 Argos high street shops.

The group’s underlying profits fell by 39% to £356m from £586m after Covid-19 related costs, sick pay, PPE etc, amounted to £485m.

Sainsbury’s announced in December that it would repay £440m of business rates relief it received during the pandemic. It followed similar moves by Tesco, Asda, Morrisons and Aldi and means the grocers collectively returned more than £1.7bn.

The supermarket has also benefited from the huge demand for food deliveries during the pandemic, resulting in online sales jumping by 120% as it has doubled its capacity to more than 850,000 online orders a week.

The supermarket is expecting its underlying profits will double this year to £620m, above the £586m from before the pandemic. This is based on the grocer’s expectation that its heavy costs will fall off, while its banking arm will see a rise in profitability, which should outweigh falling sales as customer behaviour returns to normal.

“This year’s financial results have been heavily influenced by the pandemic. Food and Argos sales are significantly higher, but the cost of keeping colleagues and customers safe during the pandemic has been high”, Simon Roberts, Sainsbury’s chief executive, said.

“Sainsbury’s was the biggest faller on the FTSE after taking a big hit from Covid-related costs. Supermarkets have done a stellar job of keeping their shelves stocked during the pandemic and expanding online capacity, but this hard work is not translating into a sharp rise in profit as some people might have expected.

Lumber prices are soaring in possible signal of oncoming inflation

Liam Roche
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Lumber prices are soaring in possible signal of oncoming inflation

Lumber up by over 200% since onset of pandemic

The price of lumber, also known as timber, a type of wood that has been processed into beams and planks, has reached $1,420, as it soared since the beginning of the pandemic.

Having reached a then record of $1,188 just a week ago, lumber is up by well over 200% since lockdowns came into effect.

The price squeeze triggered circuit breakers yesterday and caused trading of the commodity to cease for the day.

Supply Issues

“The market is in trouble. It could spiral out of control in the next few months,” Dustin Jalbert, senior economist at Fastmarkets RISI, told Fortune. It comes down to a lack of supply at a time when demand is growing for lumber as housebuilders are looking to get to work.

The undersupply has been caused by the pandemic. As lockdowns came into effect across America, production of lumber stopped, while many people took it themselves to carry out DIY projects. This was then compounded by the arrival of a housing boom caused by record-low interest rates which came about as a result of the recession. By March, housebuilding reached its highest level since 2006 exacerbating the undersupply of lumber

Possible Signal of Inflation

It will not be received as welcomed news to home builders but the commodity’s ceiling could be even higher, as a potential sign of inflation in the US economy.

“The pipeline for lumber and other wood products demand remains quite deep in 2021…Builders have plenty of ongoing projects to keep working through, which is keeping lumber and panel demand high, and making it very difficult for mills to ramp production up fast enough to rebalance the market,” says Dustin Jalbert, senior economist at Fastmarkets RISI, where he specializes in wood prices.

It is a part of a wider trend of commodity prices, which have surged in recent weeks, including corn, coffee, sugar and copper. In the UK, IHS Markit recorded that rapid cost inflation persisted across the UK private sector, led by higher fuel bills, staff wages, commodity prices and freight surcharges. “A combination of greater operating expenses and stronger customer demand meant that average prices charged continued to increase at one of the fastest rates for the past three-and-a-half years,” the composite PMI said.

Are we entering the next chapter for equity markets?

UK Investor Magazine
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Are we entering the next chapter for equity markets?

Alan Green joins the Podcast as we digest recent updates from FTSE 100 majors such as BP, WPP, Lloyds and Persimmon.

The shares operate in some of the most cyclical industries including commodities, advertising, finance and house building. This broad spread means these companies provide vital insight into the health of the wider economy.

While the recent updates from these companies were strong, the FTSE 100 is yet to breach 7,000 with any conviction, highlighting that investors could have already priced in much of the economic recovery to stock markets. We look at whether this signals we are entering the chapter for stock markets.

We discuss in detail Corcel (LON:CRCL), Catenae Innovation (LON:CTEA) and Versarian (LON:VRS).

Persimmon recover swiftly from pandemic

Liam Roche
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Persimmon recover swiftly from pandemic

House sales 11% above pre-COVID-19 levels says Persimmon

Persimmon (LON:PSM) said on Wednesday that its house sales during 2021 are 11% higher than before the coronavirus pandemic took hold in a sign of continued strength for the UK housing market.

Forward sales for the quarter are worth £3bn, according to the FTSE 100 homebuilder, up 23% on a year ago, when lockdowns started, in comparison to £2.7bn in 2019.

Persimmon also said that the average price of a house built is rising, up to £252,000, from £244,500 a year before.

Dean Finch, chief executive, said it had been a strong start to the year with build rates at pre-COVID-19 levels and first-half volumes approaching those of 2019.

Persimmon was also buying land, he added, with 6,000 plots across 29 locations acquired this year.

Commenting on the trading update, Steve Clayton, Hargreaves and Lansdown Select fund manager said:

“Persimmon’s current run-rate of sales suggests the full-year outlook could be significantly better than previous expectations. That explains the bounce in the shares in early trading, up 2% to 3210p. The market was expecting the group to match 2019’s outcome this year, but rather than simply recovering, the group looks to have moved straight onto outright growth, if it can maintain momentum in the business.”

“There are challenges ahead. Stamp Duty is coming back, and can Persimmon actually maintain production at the levels currently demanded? Persimmon’s earlier caution means it faces pressure to lift the rate of new site openings. Adding 6,000 new land plots in the quarter is a good start here, but buying land is not the same as building on it. The group are taking a cautious approach, suggesting that build rates will only match the 2019 level for the rest of the year, so analysts will be wary of pushing forecasts too far forwards at this stage. But with over £900m of cash in the bank, Persimmon faces its challenges from a position of huge strength.”

Microsoft sales rise on strength of cloud service and computer sales

Liam Roche
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Microsoft sales rise on strength of cloud service and computer sales

Microsoft’s income for Q3 rose by 44% year-on-year to $15.5bn

Microsoft (NASDAQ:MSFT) has confirmed that it met its expected sales for the quarter while it exceeded profit forecasts.

The company, founded by Bill Gates and Paul Allen in 1975, is now one of the most valuable companies in the world, worth nearly $2trn, as its share price soared over the past year. This was thanks to it securing market share in the growing cloud computing, as well as in other areas, including its Teams collaboration service.

Such services saw raised demand during lockdowns, as Microsoft’s Azure cloud service made up ground on the market leading Amazon Web Services by growing by 50% over the last quarter.

Many people working or studying from home made the decision to buy new PCs, which caused an upturn in the Microsoft Windows operating system and video game businesses.

Net income for Q3 ended in March rose by 44% year-on-year to $15.5bn. Revenue and adjusted earnings per share were $41.7 billion and $1.95 per share, above analysts’ estimates of $41.03 billion and $1.78 per share.

Ben Barringer, equity research analyst at Quilter Cheviot commented on Microsoft’s results:

“Microsoft posted a good set of numbers, largely in line with expectations, with 16% revenue growth over the quarter primarily as a result of its cloud business, which increased revenue by over 46%. Although Microsoft’s cloud platform Azure did experience a slight reduction in growth after the 48% increase posted in the previous quarter, it is still ahead of expectations.”

“Looking forward, Microsoft has phenomenal revenue resilience with plenty of revenue streams including Teams, Azure, LinkedIn, gaming, security, business analytics, AI and many more. The business should be buoyed by increased global spending on technology, which is expected to increase from around 5% of GDP to 10%, with cloud penetration also expected to increase from 20% to 80% in the years ahead.”

FTSE 100 boosted by decent gains from BP, Shell and Lloyds

Liam Roche
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FTSE 100 boosted by decent gains from BP, Shell and Lloyds

Boosted by decent gains for BP and Shell, and a 3.3% surge from Lloyds – which posted Q1 pre-tax profit of £1.9 billion against the £74 million seen this time last year – the FTSE 100 climbed 0.6% after the bell. That still, however, wasn’t enough to lift the UK index back to 7,000, instead leaving it 30 points short of that landmark level.

“Europe displayed no signs of the pre-press conference cautiousness that often clouds Fed Wednesdays, instead striving to recover Tuesday’s losses,” said Connor Campbell, financial analyst at Spreadex.

In the Eurozone, even with Deutsche Bank rising 5.4%, the DAX could only manage a 0.3% increase, keeping the German bourse 10 points adrift of 15,300. As for the CAC, a 0.4% jump sent it above 6,230, around 20 points off last week’s highs.

“If the European markets were ignoring the tension of a Fed Wednesday, the Dow Jones certainly isn’t. The futures point to a 0.1% decline from the index when trading gets underway Stateside, pushing it the wrong side of 33,950,” Campbell added.

“Though the broad consensus is that Jerome Powell and the rest of the FOMC will keep things unchanged this evening, there have been some reports suggesting that the topic of tapering bond purchases could be broached. If that is the case, then the markets could be about to end April on a bum note.”

FTSE 100 Top Movers

Lloyds (3.28%), WPP (2.84%) and Persimmon (1.92%) are the top movers at mid-morning on the FTSE 100.

At the other end, Fresnillo (-3.29%), Sainsburys (-2.23%) and Reckitt Benckiser (-1.86%) have made the biggest falls so far today.

Lloyds

Lloyds saw its profits soar during Q1 as a more positive outlook allowed the bank to reverse some of provisions it had made for loan losses following the spread of coronavirus.

The FTSE 100 bank followed in the footsteps of HSBC earlier in the week by writing back some of last year’s losses. A number of banks took large forward-looking provisions around the beginning of the pandemic, although defaults have stayed low, thanks in part to government support.

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