Change at the top for Lloyds, and Barratt Developments is cautiously optimistic

“The willingness of global governments to support an economic rehabilitation from the Covid-19 pandemic and signs of improving sentiment in China provided the backdrop to today’s surge in the FTSE 100 as it looked to recapture the highs seen in early June, rising 2.2% to nearly 6,300,” says AJ Bell Investment Director Russ Mould.

“Asian markets stormed higher on strong Chinese data which suggested that hopes for a V-shaped recovery might not be so fanciful after all.

“A so-called mini-Budget from UK chancellor Rishi Sunak on Wednesday will come with significant expectations attached after a series of measures were widely trailed in the weekend press.

“Among corporate news, there were boardroom changes afoot in the FTSE 100 as Lloyds chief executive António Horta-Osório announced plans for his departure and Aviva’s Maurice Tulloch stepped down for ‘family health reasons’.

“There had been some debate at boardroom level over Tulloch’s strategy for Aviva. His replacement Amanda Blanc increases the number of female FTSE 100 bosses by 20% to six.

“Oil prices traded higher with the global benchmark Brent reaching $43.49 per barrel, while gold was still not losing any of its sparkle, ticking up to $1,776.26 per ounce.”

Lloyds

“The changing of the guard at Lloyds has been welcomed by the market, judging by the bank’s share price going up on the news.

“A new chairman and chief executive will provide the opportunity to sharpen Lloyds’ proposition for the modern world.

“António Horta-Osório’s legacy is one of stabilising the business following the global financial crisis, returning it to private ownership and reintroducing the dividends much loved by shareholders.

“Sadly, his resignation comes at a disappointing time for the bank, suggesting his legacy might not be strong as he hoped.

“Lloyds has had to stop paying dividends again, albeit in line with its peers during the pandemic, and the share price is floating around lows not seen since 2012. Admittedly these issues aren’t his fault, but in years to come people will look back and associate Horta-Osório’s departure with darker times.

“Horta-Osório currently has 9.4 years’ service, compared to the average of 5.4 years for the incumbent FTSE 100 chief executives. However, he’s only the fourteenth longest serving boss in the index. Simon Wolfson at Next has the top slot at 19.2 years, followed by Tim Steiner at Ocado with 18.5 years in the job.

“Lloyds claims to be the UK’s largest digital bank but whoever replaces Horta-Osório will no doubt look at how technology can play a much greater role in the business. Lloyds still has a large workforce and is encumbered by clunky legacy systems and too much bureaucracy making it hard to get anything done quickly.

“Turning the bank into a more efficient machine could work wonders for customers and profits, but the challenge is so great that results won’t happen overnight.”

Barratt Developments

“Any kind of optimism is welcome in the current climate, cautious or otherwise, so the tenor of today’s trading update from Barratt Developments struck a chord with the market.

“This optimism is not founded on thin air. The company has a growing order book, has seen high customer interest levels since the reopening of its sales centres, and it now has all its sites up and running.

“The Help to Buy scheme is helping to underpin already resilient demand from homebuyers and the reported prospect of stamp duty changes is potentially an indication that the state is willing to stand behind the sector’s recovery.

“There was some bad news to balance out the good in Barratt’s statement – inevitably completions were down in the 12 months to the end of June and the average asking price also fell.

“Dividends remain off the table, but it doesn’t appear as if the market was expecting anything different on that score.

“Barratt’s concession that mortgage availability is key to the health of the new homes market is a reminder that any reduced willingness on the part of lenders to hand out high loan-to-value mortgages could be damaging.

“This nagging concern could build as the full economic impact of the coronavirus crisis comes through.”

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