BUSINESS LIVE: Lloyds profits jump; Santander earnings soar; Reckitt sales slip

Two of America’s biggest companies last night posted a combined profit of almost £35 billion as they continued to battle for supremacy in the race to corner the artificial intelligence (AI) market.

Computer giant Microsoft said profits for the three months to the end of September rose 27% to £18.3 billion, while sales rose 13% to £46.5 billion.

Santander’s profits rose 20 percent in the third quarter as the Spanish bank was boosted by the strength of its European operations, which offset weakness in America.

The London-listed group posted a net profit of €2.9 billion (£2.41 billion), beating expectations of €2.77 billion and delivering record earnings per share of €0.17, which was in line with expectations and an increase compared to €0.14 in the previous quarter. .

The group’s UK division showed strength but bosses have warned of the impact ‘prolonged high’ interest rates will have on the country.

Sales at Hermes rose sharply over the summer as it defied the recent gloom in the luxury market – but no such luck for Gucci owner Kering.

Hermes, known for its Birkin bag and silk scarves and ties, said sales rose 15.6% to £3 billion in the three months to the end of September.

Lloyds Banking Group slightly exceeded profit expectations in the third quarter after a significant fall in impairment charges.

The banking giant posted pre-tax profits of £1.86 billion for the three months ended September, more than three times last year’s £576 million, and above the £1.8 billion forecast by analysts.

Matt Britzman, equity analyst at Hargreaves Lansdown

‘Lloyds’ retail deposit base delivered a stable performance during the quarter as it managed to retain savers looking for better interest rates. As we have seen in recent quarters, consumers are aware of the interest they receive on checking account deposits and are seeking higher returns.

‘Lloyds saw a 3% fall in current account values ​​and saw more than £9 billion in outflows to date, but was able to make up for the loss this quarter with inflows into its savings products. These are less profitable products and the net interest margin was slightly lower than expected.

‘But crucially, unlike Barclays who reported yesterday, Lloyds is confident enough to keep the NIM guidance intact for the full year.

‘Impairments were lower than expected as Lloyds continues to improve macroeconomic conditions. Consumers facing higher living costs may not feel any relief from the pressure, but they are managing their finances well and remain remarkably resilient, with payment arrears stable.

‘There were whispers that Lloyds could lean on its strong balance sheet to drive forward its full-year buyback plans. But caution is advised, and investors will have to wait until the annual results provide some indication of the size of the planned distributions. Given the amount of surplus capital floating around, there is a chance of a positive surprise.”

More than half a billion pounds have been lost to fraud so far this year, as the number of scams and purchasing frauds increases.

The latest fraud data sent to the government today by industry body UK Finance reveals a growing fraud epidemic.

Borrowers appear ready for some much-needed reprieve as investors bet rates have peaked after a series of painful rate hikes.

As storm clouds gather over the global economy, official figures yesterday showed the UK labor market slowing, while the private sector suffered a third month of decline.

Cleaning products from Dettol and Lysol maker Reckitt fell short of comparable sales expectations in the third quarter, despite rising prices to help offset rising raw material costs.

On a quarterly basis, like-for-like net sales rose 3.4 percent, less than the 3.7 percent growth forecast by analysts.

But the company said it would ‘soon’ launch a new £1 billion share buyback programme, which would take place over the next 12 months.

“We are firmly on track to achieve our full year targets, despite some difficult comparatives from last year that we still face in the fourth quarter in our US food business and in our OTC (over the counter) portfolio.” ‘, said CEO Kris Licht. .

Zoe Gillespie, investment manager at RBC Brewin Dolphin:

‘After Barclays’ mixed results saw a bank sell-off yesterday, Lloyds’ update should provide some reassurance on the sector’s resilience.

‘The group’s performance is in line with expectations, the loan portfolio appears relatively stable despite the economic conditions, and expectations for the year remain unchanged.

‘The provision for doubtful debts is also relatively limited, but profit growth is somewhat slowed down by subdued demand in the current interest rate environment.

‘There are no surprises in today’s update, which should calm the market, and Lloyds appears to be holding on to cash for any opportunities that arise in the coming months.’

Santander’s third-quarter profit rose 20 percent from the same quarter in 2022 thanks to higher lending income in Europe, which offset weaker performance in the US.

The eurozone’s second-largest lender by market value posted a net profit of $3 billion, better than the $2.9 billion expected by analysts.

Santander has in the past relied on Latin America to cope with tough conditions in Europe, although like its European rivals it is now benefiting from higher interest rates.

“As the external environment becomes increasingly uncertain… I am confident that we will achieve our 2023 targets, given the positive momentum we also expect in 2024,” Ana Botin, the bank’s chairman, said in a statement.

Lloyds Banking Group’s third-quarter profit came in at £1.9 billion, slightly ahead of expectations after revenue growth from higher interest rates offset competitive pressure on margins and declining demand for credit.

Profits are up from £576 million at the same time last year and above market forecasts of $1.8 billion.

Most UK banks have reported a string of strong profits as higher interest rates have boosted lending income. But investor concerns about tougher competition for savers’ money and possible loan defaults due to a cost-of-living crisis have weighed on the sector.

Barclays shares closed 7 percent lower on Tuesday after it cut its margin forecast for the year and hinted at major cost-cutting plans.

Charlie Nunn, group CEO, said: “Guided by our purpose, we remain focused on supporting our customers and helping them navigate the uncertain economic environment.

‘The Group continues to perform well. The robust financial performance and strong capital generation in the first nine months of the year were driven by net profit growth, cost discipline and resilient asset quality. These achievements allow us to reaffirm our 2023 guidance.

“As we outlined earlier this month in the first of our four strategic seminars1, we are successfully executing on our strategic priorities. This supports progress towards our ambition to enable higher, more sustainable returns. Together it will better position us to deliver results for all our stakeholders as we continue to help Britain prosper.”