FTSE 100 steady after JP Morgan takes over First Republic, BP’s buyback disappoints and HSBC beats expectations as Ping An keeps up the pressure

“The FTSE 100 ticked higher on Tuesday morning as JP Morgan’s takeover of First Republic doused, for now, a still smouldering bank crisis,” says AJ Bell Investment Director Russ Mould.

“JP Morgan boss Jamie Dimon was quick to dismiss any comparison with 2008 – despite the regulator-brokered deal representing the second largest collapse in banking history – to which the obvious response is ‘he would say that wouldn’t he’.

“For now, the system has been able to absorb the shock of the collapse of Signature Bank, Silicon Valley Bank and now First Republic. If another domino was to fall then the relative calm seen in the market could soon break.

“UK housebuilders have been signalling some green shoots recently and house price growth picking up in April is just the tonic for a sector which has looked decidedly sickly for some time now.”

BP

“BP’s latest set of bumper quarterly results will do nothing to extinguish further calls for the oil major to pay even greater levels of windfall tax.

“BP did its best to signal how much it is already paying out in extra levies already, but this is unlikely to lead to any great deal of pity when the company is generating sufficient extra cash flow to sanction further share buybacks approaching $2 billion.

“It says something that this total, and the accompanying forward guidance around dividends and buybacks, was disappointing to shareholders and a likely reason behind a fall in the share price despite reporting better-than-expected profit. It also hints at the longer-term challenge facing BP as the company looks to balance investing in the energy transition while still doling out plenty of cash to keep investors happy.

“The issue for those who see the headline numbers and think the UK’s cost of energy problem could be solved at a stroke is that the lion’s share of its profit and cash flow is being generated outside the UK and therefore beyond the auspices of HMRC.”

HSBC

“HSBC is always a bit of an outlier in the UK banks sector because, while it has a UK high street presence, its core focus is increasingly Asia.

“It’s true a trebling of its pre-tax profit was flattered by accounting moves around the sale of its French retail banking network, which now looks like being called off, and a provisional gain from its acquisition of the UK arm of Silicon Valley Bank, though the latter does suggest this deal may prove something of a steal for HSBC.

“Chinese insurer Ping An is not dialling back its criticism of the lender. As its largest shareholder this view carries weight and the push for HSBC to spin-off its Asian operations from the rest of the business isn’t going away.

“HSBC CEO Noel Quinn points to the strong quarterly results as evidence the existing strategy is working, but Ping An’s argument is likely to be that one swallow does not make a summer and this Friday’s AGM looks set to be a testy affair.”

These articles are for information purposes only and are not a personal recommendation or advice.