The Morning Call - Lloyds increases dividend as profits rise

Highlights of the Day

Asian Markets

Asian stock markets were mostly higher with modest gains following the weak cues overnight from Wall Street

U.S. Markets

U.S. stocks snapped a six-day winning streak, as investors watched climbing bond yields, which could make equities less attractive at current levels.

Today's News

Lloyds Banking Group announced a £1bn share buyback and increased its annual dividend by a fifth as the bank reported full-year profit short of expectations. Pre-tax profit for the calendar year rose 24% to £5.3bn, less than the £5.7bn average analyst forecast. Underlying profit rose 8% to £8.5bn, slightly below expectations for £8.6bn.

Metro Bank posted its first annual profit after it recorded substantial growth in deposit and lending volumes. For the year through December, the company booked a pre-tax profit of £10.8m, swinging from a loss of £16.8m in 2016. Deposits grew by 47% to £3.7bn, while lending volumes jumped by 64% to £9.6bn. Metro Bank said it was targeting deposit volumes of £50bn-to-£55bn by 2023, by which time it hoped to have between 140 and 160 stores. The company didn’t declare a dividend.

Glencore reported profit rose 44% to $14.8bn in 2017, driven by higher commodity prices and cost reductions. Earnings before interest, tax, depreciation and amortisation (EBITDA) were $14.8bn, up 44% from $10.3bn reported in the prior year. The strong performance allowed the group to declare a dividend of $0.20 a share, $700m more than required by its new dividend policy. Marketing adjusted earnings before interest and tax was $3bn, up 3%, following strong performances by metals and minerals and energy products segments, up 28% and 9% respectively. Glencore said net debt had dropped 31% to $10.7bn at the end of 2017.

Walmart shares suffered their biggest percentage fall for more than three decades after reporting disappointing online sales figures for the Christmas period. Online sales were 23% higher in the three months to December. However, that was less than half the growth recorded in the previous quarter and lower than in the same period of 2016. Shares in the world’s largest retailer fell just over 10% to $94.11.

Barratt Developments posted its interim results, reporting strong operational and financial performance driven by customer demand. The company remained the UK’s largest housebuilder, with total completions for the six month period to 31 December standing at 7,324 plots, while it also saw good growth in profit before tax, up 6.8% to £342.7m with return on capital employed improving 1.3 percentage points to 28.3%.

AA has warned that profits will be lower than previously expected. It is expecting underlying earnings for the full year to come in between £335m and £345m, down from previous forecasts for £390m to £395m. The firm is ramping up business investments in the wake of a company-wide strategic review. Boss Simon Breakwell said the new business strategy “will take the AA from a company helping when you break down to one actually predicting when you might break down in the first place.”

Gold fell further and hit a one-week low as the dollar steadied after a recovery from last week’s three-year low

Oil Prices fell, weighed down by a rebound in the U.S. dollar from three-year lows hit last week and an expected rise in U.S. oil production.

Companies Reporting this week

Day	Companies
Monday:	Reckitt Benckiser
Tuesday:	HSBC * InterContinental Hotels
Wednesday:	Lloyds * Glencore
Thursday:	Anglo American * BAE Systems * Barclays * British American Tobacco * Centrica * Intu * Kaz Minerals * RSA Insurance * Moneysupermarket.com
Friday:	Pearson * RBS * William Hill * IAG

Early Market Movements

Market	Index	Change	% Change
UK 100	7,238.7	-8.1	-0.1%
UK 250	19,771.2	-31.7	-0.2%
GER 30	12,462.2	-25.7	-0.2%
FRA 40	5,271.0	-18.8	-0.4%
U.S. 30	24,964.75	-254.63	-1.0%
U.S. 500	2,716.3	-16.0	-0.6%
OIL (BRENT)	64.72	-0.53	-0.8%
GOLD	1,326.95	-2.24	-0.2%

UK Risers & Fallers (8:15am)

Company	Price	Change	% Change
Barratt Developments	576.2	+14	+2.5%
Lloyds	68.92	+1.07	+1.6%
Allied Minds	145.4	+4.2	+3.0%
Shire	2996	-76.5	-2.5%
BAE Systems	587.6	-8.2	-1.4%
AA	91.32	-24.98	-21.5%

Latest Broker Views

Company	Broker	Recommendation	Price	Target
Barclays	Goldman Sachs	Sell	201.05	190
BHP Billiton	Goldman Sachs	Sell	1490.4	1150
Bunzl	Barclays	Overweight	2000	2500
BT Group	Deutsche Bank	Hold	230.8	248

Forthcoming Economic Data

Time/Date	Previous	Forecast	Outcome
9.30am: U.K. Average Earnings Index 3m/y	2.5%	2.5%	–
2.15pm: U.K. Inflation Report Hearings	–	–	–
7.00pm: U.S. FOMC Meeting Minutes	–	–	–