BUSINESS LIVE: St James’s Place to cut £500m in costs; BP raises dividend; StanChart profits soar

BP raised its dividend for the first time in a year after beating second-quarter profit expectations as higher oil prices offset weak refining margins.

The energy giant reported underlying replacement cost profit, or net profit, of $2.76bn (£2.15bn) for the second quarter, beating analysts’ expectations of $2.6bn.

The result, which compares with a profit of $2.7 billion in the previous three months and $2.6 billion a year earlier, will ease pressure on boss Murray Auchincloss after BP missed expectations in the previous two quarters.

Mark Crouch, Market Analyst at eToro:

‘BP shares have fallen almost 15% since April, so investors will be confident that challenges such as the scaling back of refining operations in Germany are behind them and that the company can finish the year strongly.

‘Given the ongoing balance between investing in renewable energy sources and preserving profits and shareholder returns primarily derived from fossil fuel activities, BP will be guided primarily by what is best for its shareholders.

‘And as wind and solar struggle to meet growing global energy demand while demand for oil and gas continues to rise, that appears to be exactly what BP is doing.’

Shares listed in London are trading lower at the open as investors have mixed expectations for corporate results and are cautious about interest rate decisions in the US and UK.

The drinks sector was hit hardest, falling 6.8 percent to its lowest level since November 2020. Diageo fell 8.1 percent to the bottom of the FTSE 100 after the spirits maker reported a bigger-than-expected 4.8 percent drop in annual organic operating profit.

Energy stocks are being boosted by a 1.9 percent gain at BP, which reported a second-quarter profit that beat expectations, raised its dividend and extended its share buyback program.

Standard Chartered has since risen 5.1 percent to top the FTSE 100 after the bank announced its biggest ever share buyback of $1.5 billion and raised its profit forecast for this year.

St James’s Place has risen 18 percent to top the FTSE 250 after the asset manager announced plans to cut tens of millions of pounds in costs as it attempts to restore investor confidence following regulators’ investigation into its charges.

The Federal Reserve is expected to leave interest rates unchanged this week, while the Bank of England is targeting a cut of more than 58 percent, despite data pointing to persistent inflation in the services sector.

John Moore, senior investment manager at RBC Brewin Dolphin:

‘BP has beaten forecasts despite earlier warnings of lower refining margins and a falling oil price in the past quarter.

The major energy company is maintaining capital discipline and reducing debt, while strong cash generation is contributing to higher shareholder returns.

‘A continued global energy shortage should remain a favourable environment for BP, but the longer-term question remains how the company will make the transition to net zero, the pace and scale of change and the capital investment required.’

Business leaders have been fiercely opposed to Rachel Reeves for scrapping a number of key infrastructure projects to balance finances.

The Chancellor told MPs yesterday that the government is to scrap a number of transport plans, including the A303 tunnel at Stonehenge and improvements to the A27 Arundel bypass in the south-east.

Boris Johnson-era plans to reopen disused railway lines were also under discussion.

“If we can’t afford it, we can’t do it,” Reeves said.

Standard Chartered has planned its biggest ever share buyback of $1.5 billion and raised its profit forecast for this year. The Asia-focused bank is counting on strong economic growth in its core markets and plans to rein in costs.

The bank’s shares listed on the Hong Kong stock exchange rose 4 percent after the results were announced, while its FTSE 100 shares rose 4.7 percent in early trading.

StanChart reported statutory pretax profit for the first half of the year that rose to $3.49 billion, up 5 percent year-over-year and just above the bank’s consensus estimate.

The London-based lender, which generates most of its revenue in Asia, now expects operating profit to grow by more than 7 percent on a constant currency basis, compared with its previous forecast of 5 to 7 percent.

Global banks focused on Asia, including StanChart and rival HSBC, have benefited from higher interest rates and relatively stronger economic growth and wealth creation in the region in recent years.

“We are uniquely positioned to capitalize on the significant growth opportunities that the markets in our geography continue to offer and generate value for our clients,” StanChart CEO Bill Winters said in a statement.

‘Global trade and investment will continue to grow.’

BP beat expectations on Tuesday with a second-quarter profit of $2.76 billion, the energy giant told investors this morning. The company also raised its dividend and expanded its share buyback program.

The group raised its dividend to 8 cents per share from 7.27 cents, in line with analysts’ expectations, and maintained the pace of its share buyback program at $1.75 billion for the next three months.

BP said it still plans to buy a total of $7 billion worth of shares this year.

Underlying replacement cost profit, the company’s definition of net income, was $2.76 billion in the three months to June, beating the $2.54 billion forecast in a survey of analysts conducted by the company.

For comparison, a profit of $2.7 billion was achieved in the previous quarter, compared to $2.6 billion a year earlier.

St James’s Place is aiming to cut costs by £500m by 2030, with almost half of the money earmarked for reinvestment, as the asset manager seeks to restore investor confidence following pressure from regulators.

Boss Mark FitzPatrick, who took over the role in December, announced the plans alongside the half-year figures.

The plans, which include a target of cutting costs by £80m by 2026, see SJP aim to reduce overall costs by £100m a year by 2027 and deliver net savings of almost £500m by 2030.

About half of the savings will be reinvested in the business, the company added, including in digital services and better serving ultra-high-net-worth clients.

SJP shares have fallen about 40% over the past year after Britain’s top financial regulator announced tougher measures on firms to ensure they treat their customers more fairly.

The company is currently reviewing its pricing structure and addressing customer complaints

In February, £426 million was set aside to cover potential recovery costs.

FitzPatrick said: ‘As we look to the future, we are ambitious and have a clear direction of travel to achieve continued success. I am confident that the approach we have developed following our business review will enable us to deliver mid to high single digit annual FUM growth over time.

‘While near-term profit growth will reflect the structural impact of the transition to our new, simpler and more comparable cost structure, as announced in October last year, we expect underlying cash performance to accelerate in 2027 and beyond, doubling between 2023 and 2030.

“It’s important to know that much of this rapid growth is highly predictable because of the changes we’re making to our rates.

‘We are positioning ourselves for further success and I am convinced that with our renewed strategic focus we are well positioned for a very bright future.’