LONDON MARKET OPEN: NatWest shares slip despite quarterly profit surge

(Alliance News) - Stock prices in London opened lower on Friday with NatWest weighing on the FTSE 100 after the huge bank's third-quarter results failed to impress investors.

The large-cap index was down 30.93 points, or 0.4%, at 7,218.53 early Friday. The mid-cap FTSE 250 index was down 60.87 points, or 0.3%, at 23,139.00. The AIM All-Share index was flat at 1,223.69.

The Cboe UK 100 index was down 0.3% at 715.21. The Cboe 250 was down 0.2% at 20,770.41 and the Cboe Small Companies was down 0.1% at 15,421.04.

In mainland Europe, the CAC 40 stock index in Paris was down 0.6%, while the DAX 40 in Frankfurt was down 0.8%.

In the FTSE 100, WPP was the best performer, up 1.3%. The ad agency was extending gains made after it raised its annual guidance on Thursday. The stock closed up 8.1%.

British Airways-parent International Consolidated Airlines Group was up 0.5% after the UK government on Thursday said all remaining countries on England's red list for international travel will be removed.

UK Transport Secretary Grant Shapps said the Latin American countries of Colombia, Dominican Republic, Ecuador, Haiti, Panama, Peru and Venezuela will be taken off the list on Monday. This means arrivals will no longer need to spend 11 nights in a quarantine hotel at a cost of GBP2,285.

Midcap travel stock Carnival and easyJet were up 1.8% and 0.9%, respectively. AIM-listed Jet2 was up 1.3%.

At the other end of the large-caps, NatWest was the worst performer, down 4.5%,

For the three months to September 30, total income was up 14% to GBP2.77 billion from GBP2.42 billion last year. Operating pretax profit more than tripled to GBP1.07 billion from GBP355 million, thanks to the release of impairment provisions.

Third-quarter attributable profit rose 10-fold to GBP674 million from GBP61 million.

However, the bank's third-quarter net interest margin was 1.54%, down from 1.65% at the same time last year.

"Investor focus is likely to be on [the net interest margin] contraction, if net interest income was in-line, with management commenting that it has increased pricing on lower loan-to-value products in October. NatWest is a very rate-sensitive bank yet, with an 18.7% CET1 ratio, has an endowment problem of having too much capital," said Jefferies analyst Joseph Dickerson.

NatWest also said litigation and conduct costs were GBP294 million, which included provisions for an anticipated fine pertaining to breaches of the UK Money Laundering Regulations 2007 and "other matters".

The UK Financial Conduct Authority had charged the bank, formerly known as Royal Bank of Scotland, over failure to monitor money laundering activity by a client that deposited GBP365 million in its accounts over five years.

In the FTSE 250, ConvaTec was up 2.8% after the medical products firm said revenue totalled USD511 million in the third quarter, up 3.7% on a year before, or 2.7% at constant currency and 2.2% organically.

ConvaTec said the performance was in line with expectations. The company now expects organic revenue growth towards the top end of its 3.5% to 5.0% guidance range for 2021, with a constant-currency adjusted Ebit margin of 18% to 19%.

In Tokyo on Friday, the Nikkei 225 index closed up 0.3%. In China, the Shanghai Composite ended up 0.8%, while the Hang Seng index in Hong Kong was down 0.8%. The S&P/ASX 200 in Sydney underperformed, closing down 1.4%.

The pound was quoted at USD1.3798 early Friday, down from USD1.3808 at the London equities close Thursday.

The euro was priced at USD1.1674, down from USD1.1682. Against the yen, the dollar was trading at JPY113.52 in London, up from JPY113.29.

Brent oil was quoted at USD84.53 a barrel Friday morning, up from USD83.94 late Thursday. Gold stood at USD1,796.50 an ounce, down from USD1,802.81.

The economic events calendar on Friday has eurozone inflation and GDP at 1000 BST. US personal consumption expenditures are due at 1330 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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