After Lloyds Banking Group finally came to an agreement with the government late Friday to insure £260 billion of its toxic assets, the financial sector focus is likely to shift to Barclays, which is understood to also have applied to partake in the Treasury’s Asset Protection Scheme.
The deal that Lloyds has struck, however, involves the government raising its stake to up to 65% from its current 43.5%, and the tax payer taking around 77% overall—news that some may find hard to swallow. Meanwhile, at least one of the bank’s larger investors have called for the group’s chairman, Sir Victor Blank, to resign over the acquisition of HBOS.
So, all in all, the spotlight is still very much on the financial sector this week, with not only Lloyds’ deal to digest but also several earnings reports from insurers—the ‘new banks’ in many investors’ eyes.
Brit Insurance, Chaucer and Hiscox will kick the week off with their full-year results on Monday, while Standard Life announces its preliminary numbers on Thursday. Life assurers have seen their share prices hit hard in recent weeks amid fears they may need to ask the market for capital so this is likely to be a key question at Standard Life’s results conference. The group expects to report a total return on embedded value for 2008 roughly in line with the previous year’s at around 11.5%. Core capital and cash generation is said to be robust, but the investment market weakness will have impacted the insurer’s profitability.
Away from insurers, but sticking with the general financials, Tuesday will focus investors’ minds as Close Brothers, F&C Asset Management and Schroders will all unveil their preliminary results for the year.
Among oil services providers, Petrofac’s figures on Monday will be closely eyed for any outlook statements in light of the oil price slump and global recession, while AMEC’s preliminaries on Thursday are hoped to provide further details on strategic relationships, pricing pressures and future M&A plans. Deutsche Bank, which rates AMEC a Buy, is looking for clean net income for the year of £80 million, up 32% on the previous year, with EPS amounting to 24p.
Oil producer Tullow Oil will also update the market this week. On Wednesday, consensus is for the group to report EPS of 23p for 2008. But Charles Stanley believes that Tullow’s share price —and indeed those of its peers—is discounting a good recovery in the oil price, which the broker feels is too optimistic at present.
A number of retailers will also update the market on their recent progress. Home Retail Group and Morrison Supermarkets are both scheduled to release their trading update and preliminary results, respectively, on Thursday. Home Retail will report fourth quarter sales figures, where despite the deteriorating environment, the group is expected to have benefited from the withdrawals of competitors Land of Leather, MFI and Woolworths. Analysts are also relatively optimistic regarding Morrison’s final results, which are expected to be strong overall as the group’s Optimisation Plan continues. Charles Stanley forecasts like-for-like sales excluding petrol to have risen by 7.8% during 2008.
On the economic front, the number of bankruptcies declared in Japan in February—due for release in the early hours of Monday morning—will give an indication of the depth of the economy’s downturn, and the country’s fourth quarter GDP figure will also be eagerly scrutinised: consensus is for a decline of 3.5% from the previous quarter, or of 13.4% on the fourth quarter of 2007.
Wednesday is a big day for economic data for both the UK and the US, with the UK’s NIESR GDP estimate for February as well as the country’s trade balance for January on the cards, while the US will see the release of the Federal Reserve budget and its weekly oil inventories.
Thursday sees no let-up in the barrage of economic news, with weekly jobless claims in the US expected to come in at around 640,000—a slight increase on the previous week’s 639,000, business inventories for January seen down 1.1% after December’s 1.3% slide, and February’s retail sales forecast to fall by 0.4% last month from the previous month’s rise of 0.9%.
Bringing a busy week for data releases to an end, on Friday the US will report its trade balance for January, which is widely expected to show a marginal narrowing in the deficit to US$38.6 billion from December’s US$39.9 billion gap. And finally, the University of Michigan consumer confidence survey is seen slipping to a reading of 55.4 in March after landing at 56.3 last month.
