Mindful Money’s weekly shares watch: Barclays, ITV & Aviva

2nd March 2015


Following on from Lloyds and HSBC, the UK’s banking giants remain centre-stage this week with Barclays reporting its full-year results on Tuesday.

The business has seen its shares edge up by 3% over the past year but by a more robust 17% over the last six months and on the back of its Personal and Corporate Banking as well as its credit card businesses, it is expected the bank will report a 12% increase in adjusted pre-tax profit to £5.77bn.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers asserts that staff cuts and lower bad debts will have contributed, with the 2014 dividend payment expected to be maintained at 6.5p.

He expects an update on management’s Transform strategy and financial commitments for 2016 may be provided, whilst management’s focus on improving the group’s Return On Equity is likely to again be underlined.

Sheridan Admans, investment research manager at The Share Centre, who is calling the stock a ‘hold’ says: “Revenue from Barclays’ all-important investment bank division has been under pressure so any comments on this alongside any updates on the progress of the groups restructuring plan, will be worth noting by investors. Recent updates have helped underpin the improved performance of the share price and investors will be hoping this trend can continue.”

The banking sector however remains under the regulator’s spotlight and followers of the sector will remain focused on this subject. Bowman says: “Further charges in relation to alleged foreign exchange manipulation and Payment Protection Insurance (PPI) could be taken. Ahead of the announcement, and with the valuation still seen by some analysts as attractive, consensus opinion currently points towards a ‘strong buy’.”

Downton Abbey and X-Factor broadcaster ITV, up 14% over the past 12 months, delivers its own set of full-year numbers on Wednesday. Bowman notes that as previously predicted by management, Net Advertising Revenue for the year is expected to have grown by 5% to +2% for the fourth quarter.

Bowman says: “Pre-tax profit growth of 17% year-over-year to £682m is forecast, with management as of its half year results committing to at least a 20% annual growth in the ordinary dividend over the next three years.

“A combination of a UK Election, comparatives with the 2014 Football World Cup and the pending Rugby World Cup provide the back-drop for 2015, with guidance for the first quarter generally expected.”

Prior to the release and aided by sector consolidation hopes – Liberty Global, owner of Virgin Media, last year acquired a 6.4% stake in ITV – analyst consensus opinion currently denotes a buy.

Thursday sees Aviva update the market with its fourth quarter numbers. The insurer’s shares have risen by 16% over the past year and Admans notes that this week, investors will be looking for an update on the takeover of Friends Life Group however, with the European Union watchdog not expected to rule on the merger until the 13 March, it is unlikely much will be reported.

Admans says: “They will also be looking for any comments on how Aviva is progressing with improving its capital adequacies, internal and external leverage and growing its digital direct business. Improvements here and the takeover of Friends Life Group are key to the continuation of the company’s recovery story.”

While analysts at Nomura have just reiterated a ‘buy’ recommendation on the shares, echoing the market consensus, Admans is calling the Aviva stock a ‘hold’.

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