First of UK’s big banks reports as sector mulls over departure of NatWest CEO, British drugmaker GSK raises guidance, Heathrow halves losses

“Banks play a crucial role in making the country tick. They are trusted with our hard-earned cash and relied upon to fund a myriad of purchases from buying a house to business expansion which delivers jobs and prosperity. With that in mind it now seems absurd that the board of NatWest had considered that Alison Rose could ride out this storm,” says Danni Hewson, Head of Financial Analysis at AJ Bell.

“Despite a stellar performance as the first woman to take the helm of a UK bank, her mistake in discussing sensitive customer details with a journalist broke a sacred trust with the British public and her decision to step down was the only viable path. She will be a loss, having worked her way up the ranks and championed diversity and inclusion in the sector with a huge focus on getting more women in financial services.

“But NatWest is no ordinary bank, it is still almost forty percent owned by the UK taxpayer, and the political and regulatory ramifications of this episode are likely to ripple out for months to come.”

Lloyds

“Much will be made of Lloyds Banking Group’s 23% jump in first-half profit amid the backdrop of a cost-of-living crisis and increased pressure from regulators to share the benefits of interest rate hikes with savers.

“The net interest margin, the difference between what a bank earns in interest from loans and what it pays out, is slightly higher than analysts had forecast for the quarter, though down on where it had been in the three months previously.

“There are storm clouds gathering as the country’s biggest mortgage lender has to consider how many of its customers are likely to struggle as they face a jump from ultra-low fixed rates to the unexpected ‘new normal’.

“Lloyds boss Charlie Nunn admitted that customers were facing “significant challenges” and said that over 200,000 of its mortgage customers were among those worst affected by rising costs, a number that’s likely to be dwarfed over the coming months. To that end the bank has set aside an extra £662 million to cover expected ‘bad’ loan losses.

“For investors the bank delivered a mottled picture, with financial performance expected to slow and despite a sweetener for shareholders with a 15% jump on last year’s dividend pay-out the uncertainty has been enough to prompt a sell off this morning.”

GSK

“The British drugmaker delivered a crowd-pleasing performance bolstered by strong sales of both its shingle vaccine and HIV medicines, but there are still big questions for investors to ponder.

“Whilst GSK saw investor confidence rebound slightly after it announced it had settled its first Zantac court case, there’s still a long way to go.

“Its core business might be delivering gangbusters but a drugmaker’s real value is found in its pipeline and there’s nothing in this set of results to set pulses racing.

“It’s only been a year since it split from its consumer business allowing it to focus in on product development and investors appear to have been mollified to a degree by strong sales and a decent near-term outlook, but they will want more than more of the same.”

Heathrow

“A post-Covid travel boom has helped Heathrow pare back its losses, but it continues to blame a cap on charges for the fact it remains loss making despite a surge in passenger numbers.

“Whilst airlines have been able to hike ticket prices to help them mitigate rising prices, the airport has been locked in a dispute with the CAA over how much it can charge for landing fees.

“And with some inflation weary consumers being battered by increased mortgage payments there’s a real concern that this winter could prove a difficult one for businesses that rely on discretionary spend.”

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