TODAY’S FAYRE – Monday 20th April 2015
“To these I turn, in these I trust;
Brother Lead and Sister Steel.
To his blind power I make appeal;
I guard her beauty clean from rust.
He spins and burns and loves the air,
And splits a skull to win my praise;
But up the nobly marching days
She glitters naked, cold and fair.
Sweet Sister, grant your soldier this;
That in good fury he may feel
The body where he sets his heel
Quail from your downward darting kiss.”
Siegfried Sassoon – soldier & poet – 1886-1967
“In a time of universal deceit – telling the truth is a revolutionary act!” – George Orwell – author – 1903-1950
It would be churlish not to acknowledge the value of the PM’S and the Chancellor’s initiative in offering £4billion of shares in Lloyds Banking Group – part of the £9 million of shares that will be for sale if the Conservatives win the next General Election, that was announced in the March Budget. Though shares may be offered at a 5% discount to the current market price (on Friday 78.5p) to the general public (min £250 – max £10,000), investors should be mindful that these shares are unlikely to be an immediate bonanza for a number of reasons.
Firstly conditions have changed dramatically since the heady days when the ‘Black Horse’, was chaired by an intellectual genius – Sir Jeremy Morse, who was also on the court of the Bank of England and run with a rod of iron by its hard and much respected task-master, Sir Brian Pitman. In those days the shares paid a great dividend and allowed the Daniels regime see them touch 600p back in 2007! How many of you knew that Colin Dexter’s famous sleuth – ‘Morse’ – was named after Sir Jeremy, who had a tremendous reputation as an investigator and crossword puzzle solver?
It is great that the taxpayer will receive back £20 billion for its initial stake of circa £30 billion at a very modest profit – breakeven being 73p.Though the ‘over-hang’ of shares will have almost disappeared, there are still onerous EU/FCA regulatory requirements for banks, which ventures to suggest there must surely better alternative investments about? Also have we seen the end of PPI requirements, which to date has cost Lloyds £11 billion? Provisions for bad debts may will be lower, which is encouraging, but are there other corners of the ‘sardine tin’ to contend with? Shares in Lloyds Banking Group may possibly be a dull investment if Labour were to win the election?
My financial analyst colleague at Panmure, Keith Baird reminds me that there may be more mis-selling by Lloyds in other areas including mortgages and current accounts. Challenger banks are also looking to sing for the supper – Aldermore and Shawbrook – and there is, of course, ‘Crowdfunding.’ Even so, in his opinion Lloyds still has great strengths so will be attractive to investors, with every possibility of a greater dividend being restored! Folks, this is no ‘slam-dunk’ investment.
How poignant it was to hear that HSBC is not the only bank having to consider the cost of regulation. This morning Deutsche Bank officially announced its intention to sell Postbank, which it bought in stages for E6 billion in 2008. It has 1100 branches involved wholly in retail banking. The shares in Postbank – 6% of which is listed – could be sold over the next 18 months. At the same time Deutsche Bank will consider divesting itself of assets value at E160 billion and eventually may split the bank in to two – investment banking and corporate banking. The bank’s entire strategy is under review and decisions will be made by the end of the year.
This week’s UK results – Monday – HSS HIRE, RIO (TS), Tuesday – AB FOODS, ARM HOLDINGS, SKY, PETS-AT-HOME, INFORMA, REDROW, BHP BILITON (TS), Wednesday – TESCO, LADBROKES, PUNCH TAVERNS, TRAVIS PERKINS, Thursday – ANGLO-AMERICAN (TS), WILLIAM HILL, TAYLOR WIMPEY (TS), MEGGITT (TS), Friday – ASTRA ZENECA, RECKITT BENCKISER.
US companies posting interim results – Monday – MORGAN STANLEY, HALLIBURTON, Tuesday – VERIZON, HARLEY-DAVIDON, BAKER HUGHES, LOCKHEED MARTIN, OMNICOM, KIMBERLEY CLARK, AMGEN, YAHOO!, YUM BRANDS!, Wednesday – CITIZENS BANK, COCA-COLA, MCDONALD’S, BOEING, TEXAS INSTRUMENTS, AT&T, FACEBOOK, Thursday GM, PROCTOR & GAMBLE, RAYTHEON, CATERPILLAR, HERSHEY, ABBVIE, NASDAQ, PULTE, PEPSICO, GOOGLE, CHUBB, AMAZON, MICROSOFT, NEWMONT MINING, FREEPORT MCMORAN, Friday – XEROX, AA,
David Buik – market commentator
Panmure Gordon & Co
Panmure Gordon & Co One New Change | London | EC4M 9AF | United Kingdom www.panmure.com