The Telegraph 10/09/19 - Vox Markets | Vox Markets

The Telegraph 10/09/19

A surge in PPI claims ahead of the August 29 deadline has pushed the banking industry’s final bill for the mis-selling debacle past £50bn. Lloyds Banking Group (LLOY) and Barclays (BARC) have both been forced to increased their provisions for payouts with Lloyds setting aside another £1.8bn and Barclays coughing up £1.6bn. In July Lloyds unveiled £650m of PPI costs during the first half of the year with an added provision of just over £1bn. This was based on the assumption that the number of PPI claims would continue at the rate of 190,000 a week until the August deadline. However, a sudden surge in claims to between 600,000 and 800,000 a week last month has forced Lloyds to raise its estimate, echoing similar announcements from Royal Bank of Scotland Group (RBS) and Clydesdale Bank owner CYBG (CYBG) last week. Lloyds now expects to take a charge in the range of £1.2bn to £1.8bn, although those numbers are not final as it is still processing the last of the submissions. Meanwhile, Barclays said after the market closed on Monday that a “significantly higher than expected volume of PPI-related claims, enquiries and information requests” would lead it to take a charge of between £1.2bn and £1.6bn in its third quarter. It added: “The final outcome could be above or below the estimated range and will depend on a number of factors including the quality of recently submitted claims.”

Shares in Intu Properties (INTU) surged on Monday on hopes that the embattled shopping centre owner could be taken private. Investors piled into the owner of malls including Lakeside in Essex and Manchester’s Trafford Centre following a weekend report that private equity group Orion Capital Managers is trying to round up a consortium to buy Intu. Speculation that Orion, which focuses on property and is led by investor Aref Lahham, is targeting Intu pushed up its shares by almost 20pc in early trading. The gains were later pared back to a 10.5% rise at 40.3p, valuing the company at £548m.

Sage Group (SGE) has confirmed that it is putting its payment processing unit Sage Pay up for sale. The software company, which disposed of its payroll division earlier this year and its US payments software business in 2017, said it was “evaluating potential strategic options” for the business, including a sale. It has hired investment bank Rothschild to find a buyer for the division, which has about 50,000 small and medium business customers, according to Sky News. The valuation of Sage Pay has yet to be confirmed.

Travelodge has stolen a march on arch rival Premier Inn by increasing sales despite tough market conditions. Comparable revenue per available room – a key metric in the hotel sector – rose 0.6% in the first six months of the year, although the figure slipped to be just 0.1% higher in the three months to June. The market shrank by 2.6% and 1.8% respectively. Boss Peter Gowers said: “More and more people looking to make their travel money go further in these uncertain times.” Total half-year sales rose 6% to £337m and earnings edged up by £1m to £45m, although pre-tax profit was not disclosed. Travelodge’s ability to shrug off what Mr Gowers called “challenging conditions” comes as Premier Inn, owned by Whitbread (WTB), grapples with falling like-for-like sales. They tumbled 3.7% in the first three months of the year – a fall blamed on “ongoing political and economic uncertainty in the UK”. Premier Inn, which has 785 hotels compared with Travelodge’s 584, appeared to have left its rival in wake in recent years.

Healthcare stocks were the worst performers on Monday, as pharmaceutical giants AstraZeneca (AZN) and GlaxoSmithKline (GSK) both suffered following reports that American lawmakers plan a legislative crackdown on runaway prescription drug prices in the US. In a rare display of co-operation, Donald Trump’s White House and politicians in the Democrat-controlled House of Congress are both tackling the issue, in which companies ramp up prices of essential medicine.

Investment vehicle HGCapital Trust (HGT) also climbed on the mid-cap index after posting solid first-half results and lifting its dividend by 12%. Investec initiated coverage of the firm with a buy rating, while Liberum analysts said: “The company has continued to see consistent double digit growth across the portfolio and we see little reason to believe this will not continue in the near-term.”

A string of new Primark store openings have kept the tills ringing – but not quite enough to stave off a 2% slide in like-for-like sales. Ahead of annual results due in early November, Associated British Foods (ABF) said it expected the fast fashion retailer’s total sales to rise 4% after opening 14 new stores for the year to mid-September. Over the next year, ABF plans to add one million square feet of new space to its store estate. The group also warned its margins would continue to be hit by the weak pound, rising costs and discounting. However, finance director John Bason said ABF would rather take a hit to profits than pass on price rises. “Consumers can comfortably expect no price increases. We are managing the decline in the pound and we accept it will affect margin and take that on board ourselves,” he said.

Questor: using Tesco’s mortgage sale as a yardstick, OneSavings Bank (OSB) could double in value. Questor share tip: the supermarket unloaded its mortgage book to Lloyds last week at a price that makes the ‘challenger’ bank look cheap. Hold.

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Mentioned in this post

ABF
Associated British Foods
AZN
AstraZeneca
BARC
Barclays
CYBG
CYBG
GSK
GlaxoSmithKline
HGT
HGCapital Trust
INTU
Intu Properties
LLOY
Lloyds Banking Group
OSB
OneSavings Bank
RBS
Royal Bank of Scotland Group
SGE
Sage Group
WTB
Whitbread