Barratt Developments and CYBG

Wednesday, February 6, 2019 - 09:40

“After a strong run over the past few sessions, the FTSE 100 takes stock of events and trades flat at 7,171. Gains in housebuilders and miners are offset by weakness in pharma and oil stocks. “Asian and Continental Europe markets were also lacklustre. The pound nudged up against the dollar and gold prices chugged along to hit $1,314 per ounce. Oil prices slipped back 0.6% to $61.62 per barrel,” says Russ Mould, Investment Director at AJ Bell.

Barratt Developments

“For all the fears around Brexit hurting the housing market, housebuilders continue to churn out the profits and dish out generous cash rewards for shareholders.

Barratt Developments, in particular, has produced a set of half year results that most companies would die for.

“Its pre-tax profit is growing faster than revenue, the dividend keeps storming ahead, and it continues to push up the returns it gets from investing in the business.

“While the decline in reservation rates is something to watch, the increase in margins is a pleasant surprise given how the housebuilding sector has been struggling with rising costs and pressure on selling prices.

“For now, the investment case remains supported by very generous dividends, with Barratt announcing another £175 million capital return for November 2020, thereby extending its capital return programme. The business is clearly confident about the future, otherwise it would be stashing away its cash as protection for potential harder times.”


“Banking group CYBG has come out with figures that aren’t as bad as expected, hence why its share price has shot up, yet fundamentally there is nothing to celebrate about its performance.

“The Clydesdale and Yorkshire Bank owner has been caught up in the mortgage industry price war which has been putting pressure on margins across the sector.

“Net interest margins are a key benchmark for banks as they compare the rates lenders charge for loans against their own funding costs.

“While CYBG has improved its margin guidance for 2019, a range of 1.65% to 1.7% is hardly something to be proud of. It leaves it with barely any room for error if bad loans go up.”

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

The daily market update is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.