Slightly upgraded top-line guidance

Management slightly upgraded its top-line guidance for 2022 driven by both interest and non-interest income, while the acquisition of Ulster Bank will distort the second half materially.

Upgraded net interest income guidance

The first-quarter results were largely in line with the group’s expectations thus enabling it to qualify them as strong. The full-year guidance was upgraded on stronger net interest income largely driven by scope changes but also by the progressive support from interest rate increases.

Extra net provision releases and confirmed fee income recovery

The third quarter enjoyed further net provision recoveries and confirmed fee income recovery. The net interest margin remained under strong pressure but will benefit from a stronger TLTRO relief in Q4. The balance sheet has been positioned to benefit from interest hikes, if any.

Provision releases to the rescue

The first half of the year was impacted by heavy charges, fortunately mitigated by strong loan provision releases. Management increased its 2023 RoTE objective by 1ppt to above 9%, a demanding target that still has to be reflected in consensus or AV projections.

Full-year guidance reiterated

The quarter was in line with management’s full-year guidance, showing the first signs of a net interest margin recovery and normalisation of fee income generation and cost of risk.

The return to decent profitability levels remains a distant objective

The group managed to post almost breakeven second-half profits thanks to cost control and a sharp reduction in the cost of risk. The return to decent profitability levels remains a distant objective despite the strong planned cost reduction and the expected fast cost of risk normalisation thus evidencing structural troubles.

“One-shot” provision frontloading

Management did not hesitate to frontload the bulk of the expected annual COVID-19 impact, although the first-half pre-provision performance was affected by depressed revenue generation and a rigid cost base. The group’s recovery potential remains the big unknown.

Bottom-line losses to increase in Q2

The limited first quarter loss only partially captures the pending impact of the COVID-19-induced recession as, contrary to BOI yesterday, the group made it clear that the retained macro-economic scenario is now too optimistic.

Excess liquidity and investments weigh

The second-half showed a sharp net interest margin squeeze and a deteriorating efficiency. Management’s guidance for this year points to a confirmation of these trends. Although it is committed to offsetting accelerated investments with strong staff cuts by 2022, the viability of its above 8% mid-term RoTE objective will rely on its ability to expand the business in CIB and the UK.

Net interest margin pressure and cost inflation

The third-quarter results showed ongoing net interest margin pressure and operating expenses inflation in a context of cost of risk normalisation. Unfortunately, one will have to wait until the release of the group’s full-year results due on 6 March 2020 to know management’s action plan.

Deteriorating operating margin and increased capital consumption

The half-year results showed a net interest margin squeeze, efficiency deterioration and increased capital consumption, notwithstanding the strong pending impact of the review of the mortgage model.

On track to meet expectations

The group’s interim management statement does not provide sufficient disclosure to make an analysis of the quarterly trends. However, management is confident the group will meet expectations, while domestic economic trends have only marginally been derailed by Brexit-related uncertainties.

So far so good

The group posted a strong set of results showing faster and stronger-than-expected net interest margin expansion and no signs of a deterioration and above all anxiety on the asset quality front. It remains to be seen if the UK government will allow banks to hold on to the benefit of interest rate increases and if the UK economy proves as resilient as expected.

Sustainably robust results which we expect to trigger distributions

Legal & General disclosed strong HY 22 results, albeit in line with the consensus’ expectations. With most of the metrics improving on a yoy and sequential basis, we believe that the strong solvency position, in an environment with (sustainable?) higher yields, should trigger capital distributions to shareholders at the year-end.

And another layer of distributions

Aviva unveiled a fair operating result. While, in line with the insurance industry, Aviva saw a strongly negative impact from financial assets revaluation, the solvency position improved materially, yielding additional capital distributions. Once distributions cease, we believe that Aviva could be a takeover target.

Review of Electricity Market Arrangements - REMA Could Bring Benefits

Last week, the UK government published the consultation paper on its Review of Electricity Market Arrangements (REMA). Any change potentially represents uncertainty in a market that has been wary of changes with a number of shares falling after early details of possible reforms were flagged in the press. We review the possible changes and conclude that while there is some risk, from what we can see at present the likely outcomes could be either minimal or beneficial for investors in clean energy

Cenkos:Duke Royalty Ltd -Record revenues keep on rolling

Cenkos:Duke Royalty Ltd -Record revenues keep on rolling

SHORE CAPITAL - H&T Group (HAT) - House stock at 411p

Hybridan Small Cap Feast 09/08/22

Dish of the day Joiners: No joiners today. Leavers: No leavers today. What’s cooking in the IPO kitchen?** Unigel Group, intends to join the Aquis Growth Market. Unigel Group is a pioneer in the field of thixotropic gels for the fibre optic cable industry. The Company is also a supplier of laminated steel tapes to the fibre optic cable industry in the US. Thixotropic gels and laminated steel tapes are essential components to the rapidly growing global fibre optic cable market. The Group exports

H&T Group (HAT) - House Stock, 411p - Golden oldy … celebrating 125 years

Hybridan Small Cap Feast 21-07-2022

Dish of the day Joiners: No joiners today. Leavers: No leavers today. What’s cooking in the IPO kitchen? Unigel Group, intends to join the Aquis Growth Market. Unigel Group is a pioneer in the field of thixotropic gels for the fibre optic cable industry. The Company is also a supplier of laminated steel tapes to the fibre optic cable industry in the US. Thixotropic gels and laminated steel tapes are essential components to the rapidly growing global fibre optic cable market. The Group export

Robust AUMs in a challenging environment

Great results posted by M&G, which recorded very resilient AUMs. The firm managed to outperform the consensus despite the tough environment. While the management avoided any capital plans comments, the resilient solvency position leaves great prospects while the current share buyback is still far from being completed.

Zeus: Technology Quarterly review - August 2022

This quarter’s key observations • Subsector performance: Marketplaces was by far the best performing subsector from an aggregate share price perspective (up 19.9%) vs. an average –5.2% for the other five subsectors. UK Digital Media was the worst performing subsector with a -12.4% aggregate share price move. • Valuation trends: UK Managed Services saw the largest EV/ EBITDA derating (-2.1x) and is now on the lowest EV/Sales multiple (1.5x FY1) and second lowest average EV/EBITDA (11.3x FY1

NextEnergy Solar Fund - Fund Secures CfD Wins

NESF has boosted its effective electricity price hedging with the winning of 86W under the UK’s CfD renewable support scheme. This provides an index-linked 15-year income stream providing a strong underpinning to the fund’s earnings.

Morning Note – 1 August 2022

Purplebricks (PURP LN) - New team: new strategy

Purplebricks full year results provides the detail behind its May pre-close update (i.e. 40,141 instructions; £70m revenue; £8.8m EBITDA loss and £43.2m cash) and details Purplebricks’ plan to return to operational cash generation.

Q2 2022 Activities Update

Trident Royalties Plc (AIM: TRR) has, this morning, provided an update on its activities undertaken during the quarter ended 30 June 2022. Most of the elements of the update had already been announced in another busy quarter for the company as management finessed existing contracts. Momentum remains powerful with a 155% QoQ (15x YoY) increase in net revenue to $5.7m. The contributory components of this were varied with Koolyanobbing comfortably ahead of our forecasts whilst the gold offtake port