Intu’s pains intensify and HSBC beats expectations

“Banks and miners help to drive the FTSE 100 up 0.4% to 7384 on Friday, led by HSBC and Anglo American. Markets in mainland Europe also nudged ahead including a 0.1% gain in the DAX," says Russ Mould, Investment director at AJ Bell.

“Next week’s UK corporate calendar includes updates from ITV, Direct Line, Morrison and Barratt Developments.”

Intu Properties

“New chief executive Matthew Roberts is remarkably upbeat in his trading update commentary despite a big downgrade to full year rental guidance – from -1% to -2%, to a new range of -4% to -6%.

“Analysts will have to slash their earnings forecasts for the shopping centre landlord which explains why its share price is particularly weak following this news.

“The amount of retailers undergoing CVAs (company voluntary agreements) is really hurting Intu, so too a slowdown in new lettings as companies remain cautious about the political and retail landscape.

“CVA is an insolvency process that allows financially challenged companies to renegotiate debts with creditors including landlords. It inevitably sees landlords having to accept lower rents to avoid vacant lots.

“Intu’s pains are far from over as many retail companies are still struggling to stay afloat. The company expects CVAs to run at a higher level than in 2018.

“It is also worth bearing in mind that Debenhams accounts for 3% of Intu’s rent roll. That retailer announced a CVA last week and is closing 22 of its 166 stores. While none of this batch are located in Intu’s centres, the risk that further stores will close will hang over the landlord and its share price.

“Roberts is among a group of FTSE 350 chief executives who are facing difficult market conditions and need to come up with a plan to put their respective business back on track, with other examples including Sainsbury’s and BT. It looks like we’ll get Intu’s new plan on 31 July when it reports half-year results.”

HSBC

“Europe’s biggest bank rounds off a decidedly mixed first quarter reporting season for its sector with something of a flourish. HSBC’s adjusted pre-tax profit has come in comfortably ahead of consensus forecasts.

“Refreshingly there is not too large a difference between the adjusted and statutory number, as is often the case for banks with their many moving parts and often complex business models.

“Asia continues to power the company’s growth, and retail and commercial banking – at the more traditional end of a bank’s operations – are performing well.

“The company also seems to have got its costs under control, finally achieving positive ‘jaws’, or in plain English growing income faster than operating expenses, three months after it originally targeted this goal.

“This has been a key sticking point for the market, and it may take more than one quarter of positive performance for shareholders to be fully convinced.

“On the face of it, the company is largely in credit, but there are some items on the debit side to consider. Not least that the first quarter performance is flattered by more than $400m worth of one-off favourable items.

“Just as at Barclays, HSBC’s investment banking division remains a problem child, the company is struggling in North America, and its net interest margin – a key metric for the banks – has dipped.”

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