Lloyds Banking and Oil/Petrofac

“Having succeeded last night in setting a new record high, the FTSE 100 takes a small step back thanks to weakness in pharmaceutical, utility and telecoms stocks.

“In early trading the index had slipped 0.2% to 7,774. Nonetheless, that level still means the FTSE 100 has recovered all of the losses caused by the global market sell-off in February and is now trading 1.1% up year-to-date.

“That’s slightly better than Japan whose Nikkei 225 index is up 0.7% so far this year, although not quite as a good as the S&P 500 in the US (up 1.7%) and Hong Kong’s Hang Seng index (up 3.9%) year-to-date,” says AJ Bell Investment Director Russ Mould.

Lloyds Banking

“The sale of Lloyds’ Irish residential mortgage portfolio to Barclays effectively marks its exit from Ireland and is another example of how certain banks are cleaning up their acts and focusing on the better parts of their business.

“The Irish portfolio made a £40m pre-tax loss in 2017 and was low-yielding so you can perhaps understand why Lloyds was eager to get rid of it. Strategically it also makes sense as Lloyds has a desire to concentrate solely on the UK.

“The £4bn sale tag looks a good price and better than analyst expectations. It is also the second Irish portfolio sale this week, with AIB striking a €0.8bn deal to get rid of a portfolio of non-performing loans.”

Oil/Petrofac

“Life is starting to feel a bit easier for the companies which provide kit and expertise to the oil industry thanks to oil trading back above $80 per barrel.

“Allocating expenditure is not a decision reached over a matter of days or weeks and so more relevant is the fact crude has consistently traded above $50 for at least two years, having fallen below $30 per barrel in early 2016. It has also been trading above $60 for more than six months.

“This consistency gives the management teams of big oil companies more confidence to sanction spending on projects. Such confidence is reflected in the $1.7bn of new orders awarded to Petrofac year-to-date – a number revealed in its latest trading update.

“Despite an ongoing investigation launched by the Serious Fraud Office in May 2017 into corruption allegations, Petrofac’s shares have advanced 50% in the last three months.”

These articles are for information purposes only and are not a personal recommendation or advice.